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RESUMPTION  OF  SPECIE  PATIENT. 


A  SERIES   OF  LETTERS 


TO 


®he 


il    times, 


BY 


KNICKERBOCKER. 


SEPTEMBER-OCTOBER,  1873, 


FOR  SALE  AT  THE  OFFICE  OF  THE  NEW- YORK  DAILY  TIMES,  AT  BRENri  'NO'S 

LITERARY  EMPORIUM,  UNION  SQUARE,  AND  BY  THE 

AMERICAN  NEWS  COMPANY. 


«,  I  G  E     25      CEIVTS 


JOHN    W.    AMERMAN,    PRINTER, 
No.  47   CEDAR  STREET. 


1873. 


RESUMPTION  OF  SPECIE  PAYMENT. 


A  SERIES  OF  LETTERS 


TO 


BY 


KNICKERBOCKER. 


SEPTEMBER-OCTOBER,  1873, 


FOR  SALE  AT  THE  OFFICE  OF  THE  NEW-YORK  DAILY  TIMES,  AT  BRENTANO'8 

LITERARY  EMPORIUM,  UNION  SQUARE,  AND  BY  THE 

AMERICAN  NEWS   COMPANY. 


CE1VTS 


JOHN    W.    AMERMAN,    PRINTER, 

No.  47   CEDAR  STREET. 

1873. 


NOTE. 


KNICKERBOCKER,  in  compliance  with  a  very  general  request,  prints  his  recent 
letters  to  the  New-York  Times  in  a  pamphlet  form.  As  they  were  in  the  outset 
only  intended  to  invite  public  attention,  through  the  Press,  to  what  seems  to  be  a 
simple  and  practical  way  of  resumption,  the  constant  repetition  of  the  idea,  which  is 
the  base  of  the  whole  argument,  was  unavoidable.  That  idea  is,  that  a  gradual 
resumption  can  be  reached  by  withdrawing  paper  and  substituting  coin  for  the 
paper  withdrawn  in  the  circulating  medium,  without  inflation  or  contraction. 

KNICKERBOCKER  owns  receipt  of  a  large  number  of  letters  and  pamphlets, 
on  the  subject  of  American  Finance,  and  tenders  to  their  authors  his  hearty  thanks. 
He  also  offers  his  acknowledgments  to  the  Press  throughout  the  country  for  its 
kind  notice  and  general  reprint  of  his  Letters. 


TABLE  OF  CONTENTS. 


PAGE 

1.  Onr  Opportunity, 5 

2.  Our  True  Policy, 8 

3.  Our  Present  Need, 10 

4.  Substitution  not  Contraction, 13 

5.  No  Further  Inflation, 15 

6.  Gradual  Resumption, 20 

7.  The  Approach  to  Specie  Payment, 27 

8.  The  True  Plan  for  Resumption, 32 

0.  Our  Gold  Resources, 38 

10.  What  Shall  We  Do  With  It  ? 43 

11.  Flexibility  in  the  Currency, 48 

12.  Now  or  Never — the  Duty  of  the  Government  as  Regards  Resumption,. .  53 


M207701 


Letter  No.  I. 
OUR  OPPORTUNITY. 

To  the  Editor  of  the  New-  York  Times  : 

THE  eyes  of  the  country  are  turned  upon  the  Secretary.  The 
occasion  is  one  of  those  which  demand  the  exercise  of  the  greatest 
qualities  of  the  mind — firmness,  courage  and  fertility  of  resource.  In 
such  emergencies  real  power  asserts  itself,  and  history  accords  to  the 
successful  minister  the  highest  niche  in  the  temple  of  fame.  Not  to 
HAMILTON,  who  organized,  nor  to  GALLATIN,  whose  comprehensive 
and  economic  mind  developed  the  administration  of  the  Treasury 
Department,  nor  yet  to  CHASE,  who,  in  the  midst  of  a  great  war, 
successfully  transformed  the  cumbrous  and  irresponsible  State  bank 
system  to  a  general  banking  law,  with  a  homogeneous  currency,  was 
such  an  opportunity  afforded  as  now  offers  itself  to  the  Secretary  of 
the  Treasury. 

Though  a  debtor  nation^  in  that  our  national  and  corporate  obli- 
gations are  largely  held  by  other  nations,  while,  on  the  other  hand, 
we  hold  few,  if  any,  foreign  securities,  we  are  a  creditor  trade.  The 
turn  of  exchanges  is  in  our  favor,  and  must  remain  so  for  a  consider- 
able period.  The  crops  of  both  England  and  France  are  notoriously 
deficient,  while  those  of  the  United  States  are  unusually  large.  A 
heavy  demand  will  soon  set  in  from  Europe  for  American  bread- 
stuffs,  and  gold  must  inevitably  flow  to  this  country  in  payment. 
Indeed,  the  stream  has  already  commenced.  Last  week  a  million 
of  dollars  was  received,  and  to-day's  advices  report  the  shipment  of 
another  million  to  New- York  and  half  a  million  to  Canada.  The 
Bank  of  England  sounds  the  alarm-bell  in  a  first  raise  of  the  rate  of 
interest — a  warning  to  the  mercantile  community  of  Great  Britain 
to  take  in  sail  and  prepare  for  heavy  weather. 

On  the  other  hand,  it  is  certain  that  no  advance  in  rate  can  pre- 
vent the  shipment  of  coin  in  considerable  sum  to  this  side.  It  cannot 
be  doubted  that  during  the  last  ten  days  the  outstanding  orders  for 
purchase  of  foreign  goods  for  American  account  have  been  largely 

2 


6 

curtailed,  (fifty  per  cent,  is  a  low  estimate,)  while  no  new  orders  are 
likely  to  be  given  in  the  present  condition  of  affairs. 

Very  little  demand  for  foreign  exchange  need  be  looked  for  from, 
or  on  account  of,  our  importers.  How,  then,  can  the  exports  of 
grain  be  paid  for  by  foreign  nations,  unless  by  coin  or  a  return  of 
American  securities  ?  But  experience  has  shown  that  our  Govern- 
ment securities  are  just  about  the  last  things  which  the  British 
people,  or  European  nations  generally,  care  to  part  with.  The  wise 
policy  of  the  Government  in  reducing  the  extent  of  the  debt  has 
secured  a  firm  holding  of  it.  As  for  rail-road  securities,  the  tone  of 
the  American  market  is  not  favorable  to  that  style  of  remittance 
just  now.  It  seems  inevitable,  then,  that  a  more  considerable  flow 
of  gold  than  has  ever  before  taken  place  has  already  commenced 
toward  this  country.  The  balance  of  trade  is  in  our  favor,  and  will 
so  remain  if  the  Secretary  of  the  Treasury  be  equal  to  the  occasion. 

In  the  light  of  recent  experience  it  may  safely  be  affirmed  that 
the  country  has  "  grown  up,"  as  the  favorite  phrase  is,  to  the  present 
volume  of  the  circulating  medium,  say  seven  hundred  millions  dol- 
lars greenbacks  and  national  currency.  In  1860  the  circulating 
medium  was  estimated  to  amount  to  four  hundred  and  fifty  millions, 
of  which  two  hundred  millions  were  in  bank  notes  and  two  hundred 
and  fifty  millions  in  gold  and  silver.  In  1860,  with  gold  at  par,  the 
sum  of  national  transactions  demanded  a  circulation  of  four  hundred 
and  fifty  millions  of  dollars.  In  1873  it  demands  seven  hundred 
millions,  at  least  it  so  appears.  When  the  precise  measure  of  the 
national  transactions  is  reached,  and  the  balance  of  trade  being  in 
our  favor  there  is  no  export  demand  for  specie,  gold  should  be  at 
par. 

What  is  the  price  of  gold  to-day  ?  Had  .the  Secretary  not  with- 
drawn from  market  the  amount  advertised  for  sale,  this  question 
could  have  "been  yesterday  answered.  Who  can  answer  it  to-day  ? 
Is  it  112,  the  price  nominally  fixed  by  the  Gold  Board  for  settle- 
ment ?  This  is  to  assume  that  in  the  terrible  revulsion  of  last  week, 
when  all  other  values  have  been  affected— except  Government 
values,  sustained  by  their  conversion  into  currency — gold  has  neither 
increased  nor  diminished  in  value ;  that  its  purchasing  power  is 
neither  greater  nor  less  than  it  was  ten  days  since.  This  is  simply 
absurd.  Is  it  worth  more  or  less  ?  Evidently  less,  since  London 
exchange  is  offering  freely,  without  many  takers,  at  104  per  cent. ; 
a  nominal  premium  of  4  per  cent.,  in  reality  at  4  per  cent,  discount, 
the  par  of  exchange  being  108  per  cent.  This  would  indicate  that 
gold  to-day  is  worth  4  per  cent,  less  than  its  nominal  price,  i.  e.,  108 


per  cent.  If  we  judge  it  by  currency,  which  yesterday  sold  at  3 
per  cent,  premium,  then  109  per  cent,  would  appear  as  its  present 
value.  If  we  judge  it  by  the  decline  in  all  other  values,  it  seems 
more  probable  that  it  is  worth  little,  if  any  thing,  above  par. 
We  entertain  little  doubt  that  if  even  a  moderate  sum,  say 
85,000,000,  were  added  to  the  gold  now  on  the  market,  its  price 
would  rapidly  fall,  until  those  persons  who  now  hoard  currency  at 
a  premium  would  exchange  their  hoard  for  gold ;  in  other  words, 
until  there  should  be  an  equalization  between  gold  and  greenbacks. 
This  is  practical  resumption,  and  every  dollar  of  gold  in  the 
country  would  flow  into  circulation  so  soon  as  this  par  were  reached, 
while  the  flow  from  abroad  would  weekly  add  to  the  amount  thus 
restored  to  general  use.  Currency  could  then  be  gradually  retired, 
and  gold  would  flow  in  to  fill  its  place.  So  long  as  the  exchanges 
remain  favorable,  nothing  will  be  necessary  to  restore  specie  pay- 
ment beyond  this  gradual  withdrawal  of  currency  and  inflow  of 
gold.  The  Secretary  could,  moreover,  by  direct  purchase  of  gold  in 
foreign  markets,  contribute  in  times  of  necessity  to  the  maintenance 
of  the  par  of  greenbacks. 

Let  the  Secretary  continue  the  sales  of  gold ;  let  him  put  upon 
the  market  some  part  of  the  large  sum  now  held  and  ascertain  its 
value.  A  few  millions  would  decide  this  point  beyond  a  question. 
If  it  be  not  materially  above  par,  as  we  believe,  the  step  to  practical 
resumption  is  a  slight  and  easy  one.  Then  out  of  the  "nettle 
danger  we  would  pluck  the  flower  safety,"  and  the  country  would 
find  its  profit  even  in  the  very  depth  of  this  calamity.  On  the 
other  hand,  if  this  occasion  be  neglected,  all  thought  of  resumption 
of  specie  payment  may  as  well  be  abandoned  for  the  next  decade  at 
least. 

If  the  policy  of  the  Treasury  Department  be  not  shaped  toward 
resumption  when  the  exchanges  are  in  our  favor  and  coin  flowing 
in  upon  us,  we  may  as  well  abandon  all  hope  of  specie  payment  in 
our  generation. 

I  am,  sir,  yours  truly, 

KNICKERBOCKER. 
September  27, 1873. 


Letter  No.  II. 
OUR  TRUE  POLICY. 

AT  every  turn  the  question  is  now  heard,  "  Are  we  about  to  re- 
sume specie  payment  ?"  The  public  conscience  seems  to  have  at 
last  accepted  the  idea  of  resumption  as  a  sensible  idea — as  a  prac- 
tical idea — as  no  longer  theoretical  and  impracticable.  What  is 
practical  resumption  ?  The  equalization  of  currency  and  coin — in 
other  words,  gold  at  par.  It  lies  in  the  power  of  the  Secretary  to 
hasten  or  retard  this  equalization.  The  public  mind  is  set  against 
any  undue  interference  on  the  part  of  the  Secretary  in  the  financial 
affairs  of  the  country.  It  holds  it  to  be  a  dangerous  thing  to 
habituate  the  banking  and  mercantile  classes  to  such  interference. 
But  there  are  many  ways  of  interference.  Negative  action  is  at 
times  as  effective  as  positive  action.  Of  this  there  was  a  plain 
instance  during  the  past  week.  The  sale  of  gold  advertised  by  the 
Secretary  was  countermanded.  This  was  accepted  at  once  by  the 
gold  speculators  as  an  announcement  that  the  current  policy  of  the 
Government  was  now  changed,  and  that  it  would  no  longer  put 
upon  the  market  its  surplus  reserve.  Rumors  were  spread  of  the 
weakness  of  the  Treasury.  Hence  the  flurry  which  carried  up  the 
nominal  price  of  gold  to  11 5|,  from  which  it  again  receded  to  112. 
We  say  nominal  price,  because  it  is  well  known  that  there  is  not 
enough  cash  gold  on  the  market  to  afford  room  for  any  considerable 
transactions — i.  e.9  sale  and  delivery — and  thus  to  make  a  real  price. 
The  whole  movement  was  a  domestic  transaction  among  the  gold 
brokers  themselves,  in  which  the  outside  public  had  little  or  no 
interest. 

We  ask  again,  what  is  the  true  value  of  gold  ?  and  we  repeat  in 
the  words  of  Saturday,  that  it  can  only  be  ascertained  practically 
by  the  sale  of  say  five  millions.  As  there  is  no  demand  for  export, 
and  the  advices  from  Great  Britain  are  of  continued  and  increasing 
shipments,  it  is  absolutely  impossible  that  there  should  be  any  de- 
mand for  speculative  purposes.  Who  is  to  buy  gold  with  hope  of 
profit  in  the  face  of  large  importations  ?  What  hinders  the  Secre- 
tary from  continuing  his  sales  ?  It  cannot  be  said  that  he  fears  to 
deplete  the  Treasury.  A  fall  in  gold  would  increase  rather  than 


9 

diminish  his  store,  by  just  so  much  as  such  fall  would  tempt  the 
importer  to  withdraw  his  bonded  stock  from  warehouse,  and  pay  his 
duties  into  the  Treasury.  It  cannot  be  that  it  is  because  he  fears 
to  withdraw  currency  from  the  street,  because  a  simultaneous  pur- 
chase of  bonds  would  immediately  restore  that  currency.  What 
would  be  the  effect  of  the  sale  of  five  millions  of  gold  ?  We  again 
repeat  that  gold  would  fall  at  once  to  its  real  value.  So  soon  as  it 
reached  104  or  103,  the  price  at  which  currency  sold  last  week,  it 
would  be  taken  by  the  savings  banks  for  permanent  holding,  and 
by  the  large  number  of  persons  who  now  hoard  currency.  By  ex- 
actly the  amount  of  these  purchases,  currency  would  be  set  free  to 
perform  its  usual  offices,  to  the  great  relief  of  the  whole  community. 
The  gold  would  not  pass  into  the  hands  of  speculators,  for  they  have 
no  money  wherewith  to  purchase  it,  even  if  so  inclined,  and  credit 
is  not  money  in  this  time  of  shrinkage.  On  the  contrary,  the  gold 
thus  released  from  the  Treasury  would  pass  into  the  hands  of  the 
banking  institutions  of  the  country,  and  there  await  the  near  day 
of  resumption.  A  fall  in  gold  would  then  be  inaugurated,  and  in 
a  very  short  time  par  would  probably  be  reached.  When  there  is 
more  gold  offering  than  there  is  demand  for,  as  a  commodity,  it 
will  fall  to  par,  and  being  useless  otherwise,,  there  being  neither 
profit  nor  hope  of  profit  in  keeping  it,  it  will  float  in  the  currency. 
Then  the  hour  will  have  arrived  for  the  Secretary  to  take  in  his 
greenbacks,  while  gold,  freed  from  its  confinement,  will  flow  in  to 
fill  the  vacuum  thus  created.  A  firm  policy  on  the  part  of  the  Gov- 
ernment, checking  expansion  and  holding  the  banks  firmly  to  their 
engagements,  will  enable  the  Secretary,  in  a  period  of  time,  which 
cannot  be  measured,  and  which  should  not  be  unduly  hastened,  to 
retire  the  whole  of  the  greenback  issue.  The  circulating  medium 
of  the  country  would  then  consist  of  $350,000,000  of  coin  and  of  the 
national  bank  currency,  about  the  amount  the  transactions  of  the 
country  are  generally  supposed  to  require,  with  prices  at  gold 
values — that  is,  with  gold  at  par. 

Can  there  be  a  more  favorable  moment  for  the  inauguration  of  a 
new  policy  ?  The  exchanges  are  in  our  favor.  The  gold  and  silver 
product  of  the  country  will  remain  with  us,  and  our  great  crops  can 
only  be  taken  by  direct  shipment  of  coin  from  abroad.  The  coun- 
try should  resolutely  set  its  face  against  any  new  expansion.  Let 
us  reconcile  ourselves  to  the  present  reduction  in  values  where  not 
unnaturally  low,  and  with  moderate  importation  and  universal 
economy  strengthen  our  financial  position.  All  this  seems  to  be  in 
the  power  of  the  Secretary.  Is  it  not  worth  the  effort  ?  With  a 


10 

firm  hand  at  the  helm  we  may  pass  the  dangerous  breakers  and 
reach  the  safe  and  open  sea.     Is  not  this  our  true  policy  ? 

KNICKERBOCKER. 
NEW- YORK,  September  30,  1873. 


Letter  No.  III. 
OUR  PRESENT  NEED. 

No  one,  however  interested  in  stock  values,  or  in  industrial  or 
mercantile  enterprises,  will  deny  that  the  present  need  of  the  coun- 
try at  large  is  the  movement  of  the  crops  from  the  interior  to  the 
sea-board,  and  their  prompt  shipment  to  the  ready  market  which 
awaits  them  on  the  other  side  of  the  Atlantic.  Though  all  crops 
will  somewhat  suffer  from  delay,  we  refer  for  the  moment  only  to 
those  to  which  delay  may  not  only  be  injurious  but  ruinous.  The 
cotton  crop  may  wait  its  time,  although  it  may  be  more  profitable  to 
the  country  that  it  should  go  rapidly  forward.  To  it  the  question 
of  early  or  late  movement  is  after  all  only  one  of  comparative  profit. 
The  grain  and  produce  crops  are  not  in  the  same  situation.  To 
these,  every  day's  delay  is  fraught  with  incalculable  danger.  The 
present  stoppage  occurs  at  the  very  critical  moment.  Cotton  may 
leave  the  Southern  ports  or  our  own  at  any  period ;  there  is  no 
danger  of  ice-bound  fleets  upon  the  Atlantic,  but  the  time  for  the 
inland  transport  of  our  Western  product  to  the  sea-board  markets 
is  necessarily  limited.  In  these  latitudes  there  is  only  one  period 
for  such  transport,  and  that  a  short  one,  between  the  harvesting  of 
the  crops  and  the  general  closing  of  the  canals. 

Were  we  to-day,  at  the  beginning  of  September,  instead  of  the 
first  days  of  October,  we  might  wait  in  patience  for  a  general  return 
of  confidence  and  the  gradual  release  of  currency  to  play  its  usual 
part  in  this  most  important  portion  of  our  foreign  trade.  There  is 
an  axiom  current  still  among  our  older  and  conservative  merchants, 
"  that  the  true  time  to  sell  is  when  there  is  a  wish  to  buy."  And  it 
is  true  of  nations  as  of  individuals.  We  have  a  great  grain  crop. 
The  European  nations  allow  that  they  are  sadly  in  want  of  a  large 
part  of  what  we  have  to  sell.  How  shall  we  give  them  that  which 
they  are  so  ready  to  take  ! 

The  recent  stringency  in  money — we  use  the  word  deliberately, 
because  currency  is  now  our  only  money — since  by  our  necessities, 


11 

springing  from  the  abnormal  state  of  affairs  into  which  war  led  us, 
gold  is  only  as  yet  a  standard  of  value — the  recent  stringency  in 
money  has  already  arrested  the  ordinary  exchanges  of  produce  for 
currency,  which  always  take  place  at  this  season.  To-day  foreign 
exchange  is  quoted  as  "higher;"  this  means,  that  the  produce 
already  forwarded  and  ready  for  shipment  has  found  shipment,  and 
that  the  bills  of  exchange  drawn  against  it  have  found  buyers — but 
to  how  limited  an  extent !  The  extent  is  easily  measured.  The 
foreign  bankers,  relieved  from  the  immediate  pressure  by  just  so 
much  as  their  discounts  of  paper  for  their  own  or  foreign  account 
have  been  taken  by  the  banks  or  note  brokers — acting  for  their  own 
or  friends'  account — have  been  able  to  use  such  relief  in  fresh  pur- 
chases. The  purchase  of  bankers'  exchange  by  importers  is  not 
worth  the  naming.  The  importers,  resting  on  their  banks  for  their 
discounts,  have  surely  not  been  permitted  to  use  such  discounts  for 
much,  if  any  thing,  more  than  the  payment  of  their  obligations  to 
such  banks  or  the  withdrawal  of  the  engagements  of  their  creditors 
endorsed  by  them. 

Beyond  this  point  there  has  been  and  there  is  no  present  relief  to 
the  dead-lock  in  exchange.  Precisely  as  gold  is  held  above  its 
value,  because  there  is  no  cash  gold  in  the  market,  and  no  buyers  at 
its  present  unreasonable  price,  so  produce  bills  have  advanced,  be- 
cause those  on  the  market  have  been  already  absorbed  by  the  funds 
which  the  foreign  bankers,  no  longer  timid  as  to  the  immediate  fu- 
ture, have  been  willing  to  unlock  from  their  strong  boxes.  But  it 
may  be  safely  said,  that  all  the  foreign  bankers  combined  have  not 
to-day  the  power  to  move  one  fortnight's,  if  even  one  week's,  re- 
ceipts of  our  crops.  The  business  of  a  foreign  exchange  banker  is 
not  to  use  his  own  funds  in  the  purchase  of  bills  for  remittance 
abroad  and  return  in  gold,  but  for  the  purchase  of  just  so  many 
bills  as  he  may  find  sale  for.  He  is  the  agent  in  the  transaction, 
not  the  principal.  He  can  only  be  the  principal  to  the  extent  of 
his  own  available  funds.  Beyond  this  he  may  look  for  receipts  of 
coin  sent  from  abroad  for  investment  here  in  bills  at  a  low  price 
against  bills  of  lading.  But  this  demands  time.  Have  we  the  time 
to  spare  ?  Can  the  country  safely  wait  for  this  "  barter  trade  ?" 
Will  any  ordinary  release  of  currency  provide  the  relief  necessary 
in  time,  or  before  the  closing  of  the  canals  ?  It  is  not  necessary  to 
touch  upon  the  power  of  the  rail-roads  ;  we  need  every  avenue  for 
a  cheap  movement.  The  present  stringency  will  make  it  costly 
enough  in  any  event. 

The  Produce  Exchange  saw  the  difficulty  early  and  appealed  to 


12 

the  Secretary  of  the  Treasury.  In  1857  they  appealed  to  the  banks 
of  New- York,  who  were  then  the  masters  of  the  currency  under  the 
State  laws.  The  banks  associated  themselves  and  appointed  an 
Exchange  Committee,  which  went  into  the  open  market  and  bought 
the  low  bills,  to  a  small  extent,  it  is  true,  because  our  importers 
were  largely  debtors  abroad,  and  the  instant  the  foreign  bankers 
saw  that  the  banks  were  ready  to  purchase,  they  entered  the  market 
themselves.  This,  it  is  to  be  remembered,  was  after  the  banks  sus- 
pended, when  the  whole  community  sanctioned  that  suspension,  and 
when  gold  was  at  a  slight  premium. 

To-day  the  banks  are  not  in  a  similar  situation.  They  are  under 
positive  engagements  as  national  banks  to  the  Government,  and 
gold  is  far  above  par,  nominally  at  least.  The  banks  must  put 
their  own  houses  in  order.  Therefore,  to  the  Secretary  of  the 
Treasury  the  Produce  Exchange  of  New- York  applies  for  aid,  and 
the  interior  Produce  Exchanges  suspend  all  transactions  until  they 
receive  that  currency,  to  obtain  which  they  are  straining  every 
nerve  and  drawing  out  every  Eastern  balance. 

The  Secretary  replies  that  he  would  not  if  he  could  enter  into  any 
rivalry  with  the.  foreign  bankers.  Why  need  he  enter  into  any 
rivalry  ?  Let  him  make  an  arrangement  by  Syndicate,  if  desirable, 
with  BROWN  BROTHERS  &  Co.,  DUNCAN,  SHERMAN  &  Co.,  JOHN 
MUNROE  &  Co.,  DREXEL,  MORGAN  &  Co.,  the  WARDS,  who  are 
still  the  time-honored  agents  of  the  BARINGS,  for  the  import  of 
$20,000,000  to  $25,000,000  of  coin,  and  provide  such  currency  as  they 
may  need  here  for  immediate  use  in  purchase  of  produce  bills,  or  by 
other  modes  as  they  may  elect  to  bring  on  the  Western  produce. 
The  844,000,000  reserve,  which  the  President  seems  willing  to  use  in 
imperative  need,  could  not  be  better  applied  for  the  general  interest. 
If  the  Secretary  have  not  the  authority,  let  him  summon  the  Finance 
Committees  of  the  Senate  and  House  to  endorse  his  request  to  the 
Executive  to  order  such  action,  under  their  engagement  to  bring  in 
a  bill  of  indemnity  at  the  next  session  of  Congress.  Such  practice 
is  usual  in  governments  in  times  of  national  disaster.  We  will  not 
refer  here  to  the  effect  such  action  as  this  would  have  upon  the 
restoration  of  specie  payment.  The  Secretary  need  not  hug  his 
gold-bags  and  hesitate  as  to  what  premium  his  reserves  of  coin  may 
be  worth.  The  country  will  forgive  him  all  the  difference  his  hoard 
is  worth  above  currency  if  by  his  action  gold  reaches  par,  and  the 
American  Eagle  once  more  have  its  place  not  only  in  the  American 
heart,  but  the  American  pocket. 

KNICKERBOCKER. 
NEW- YORK,  October  2, 1873. 


13 


Letter  No.  IV. 
SUBSTITUTION  NOT  CONTRACTION. 

IT  is  clear  that,  for  the  present  at  least,  there  is  no  excess  of  cir- 
culating medium — we  may  as  well  say  of  currency,  because  the  cir- 
culating medium  is  now  composed  wholly  of  currency,  in  nearly 
equal  proportions  of  greenbacks  and  national  bank  notes — the  cir- 
culating medium,  the  measure  by  which  all  values  are  graded,  con- 
sisting at  the  moment  of  seven  hundred  millions  of  notes.  That 
there  is  a  scarcity  of  currency  to  carry  on  the  transactions  of  the 
country  at  this  day,  leads  to  the  natural  and  not  unfair  inference, 
that  the  business  of  the  country  has  "fgrown  up "  to  the  present 
amount  of  circulating  medium. 

As  we  have  before  stated,  the  business  of  the  country  was  car- 
ried on  in  1860  by  a  circulating  medium  of  four  hundred  and 
fifty  millions  of  dollars,  of  which  two  hundred  millions,  by  official 
statement,  were  in  State  bank  notes,  and  two  hundred  and  fifty 
millions,  by  the  estimate  of  those  best  fitted  to  judge,  in  coin, 
With  this  amount  of  circulating  medium  prices  were  at  gold  values 
and  gold  itself  at  par.  When  there  is  no  demand  for  gold,  except 
as  a  commodity — that  is,  when  there  is  no  demand  for  it  as  money 
to  pay  the  indebtedness  of  this  country  to  foreign  countries — it 
must  take  the  fate  of  all  other  commodities,  and  rise  or  fall  as  the 
circulating  medium  of  the  country  is  extended  or  diminished. 

The  experience  of  all  nations  has  shown  that  just  so  far  as  the 
circulating  medium  is  expanded  prices  rise,  and  so  far  as  it  is  con- 
tracted prices  fall.  There  can  be  no  better  illustration  than  that  of 
the  thermometer.  The  degrees  are  measured  from  freezing  point  to 
that  where  water  boils,  according  to  the  length  of  the  instrument. 
So  with  the  circulating  medium  ;  double  its  extent  and  the  prices 
measured  by  it  double.  Reduce  it  one-half  and  the  prices  measured 
by  it  fall  one-half. 

That  we  have  not  too  large  a  circulating  medium  is  clearly  shown 
by  the  fact  that  there  is  now  a  scarcity  of  it.  General  prices  are 
now  reduced  to  gold  prices,  and,  as  this  stringency  becomes  felt  in 
every  branch  of  trade,  retail  as  well  as  wholesale,  prices  will  not 
range  above  those  that  would  range  were  we  at  specie  payments. 

The  only  value  about  which  we  are  ignorant  to-day  is  the  value 


14 

of  gold.  Had  the  Secretary  of  the  Treasury  continued  his  sales  in- 
stead of  arresting  them,  we  should  have  been  in  no  uncertainty  on 
this  subject  to-day.  Under  the  idea  that  this  officer  had  become 
alarmed  about  the  strength  of  the  Treasury — an  odd  idea  enough 
when  the  cable  announced  large  shipments  of  coin  to  this  side  from 
Europe — the  gold  brokers,  whose  business  would  be  utterly  de- 
stroyed were  gold  to-day  at  par,  made  desperate  efforts  to  raise  the 
price  of  gold.  This  spasmodic  effort  soon  ran  out  its  strength,  and 
gold,  which  advanced  from  112  to  115f,  has  again  fallen  to  110. 
We  again  repeat  that  we  do  not  believe  that  five  millions  of  gold 
could  to-day  be  put  upon  the  market  without  its  price  falling  to 
par.  With  foreign  exchanges  in  our  favor,  a  great  crop  going  for- 
ward, and  large  amounts  of  coin  already  on  the  way  to  this 
country,  there  is  little  temptation  to  the  speculator  to  risk  his 
money  in  the  purchase  of  gold  at  any  point  above  par. 

We  assert  that  gold  is  not  worth  more  than  par — a  statement  the 
truth  of  which  can  only  be  established  by  the  renewal  of  sales  by 
the  Secretary,  the  only  holder  of  gold  to  whom  a  fall  is  not  an  in- 
jury. The  great  public  advantage  which  will  accrue  from  the  de- 
cline of  gold  to  par  is  so  infinitely  greater  than  the  loss  which  may 
accrue  to  the  Treasury  from  the  loss  of  the  premium  upon  the  stock 
now  held  by  it,  that  it  seems  almost  an  offence  to  the  good  sense  of 
the  Secretary  to  suppose  such  a  consideration  to  exist  in  his  mind. 
If  gold  be  not  worth  more  than  par,  then  resumption  may  be  made 
without  contraction ;  that  is,  without  a  contraction  of  the  circulating 
medium.  Practical  resumption  means  substitution,  not  contraction 
— the  substitution  of  coinTor  paper  in  our  circulating  medium.  How 
is  this  to  be  effected  ?  In  the  first  place  evidently  only  by  the 
withdrawal  of  currency  and  the  creation  of  a  vacuum  in  the  circu- 
lating medium,  now  wholly  currency,  into  which  gold,  floating  at 
par,  will  flow  and  be  absorbed.  By  just  so  much  as  currency  is 
diminished  and  gold  fills  its  place  will  the  circulating  medium  be 
strengthened.  So  long  as  gold  remains  at  par  this  process  may  con- 
tinue. The  Secretary  can  retire  his  greenbacks  and  gold  will  take 
their  place.  This  is  the  immediate  need,  and  our  present  object  is 
to  show  that  it  can  be  reached  without  contraction.  The  experiment 
is  worth  making.  Let  the  Secretary  put  out  his  gold  ;tnd  ascertain 
its  value.  That  value  will  show  the  measure  of  our  inflation,  if  such 
there  be.  If  it  be  not  above  par,  as  seems  probable,  it  will  be  evi- 
dent to  the  merest  tyro  in  finance  that  the  country  has  grown  up  to 
its  present  circulating  medium,  and  that  the  substitution  of  coin  for 
currency  is  now  possible.  When  sufficient  currency  has  been  taken 


15 

out  of  and  an  equal  amount  of  gold  has  entered  into  the  circulating 
medium,  legal  resumption  will  follow  as  a  matter  of  course,  and  all 
this  without  any  disturbance  of  values  or  further  shrinkage.  So 
long  as  money  is  at  seven  per  cent,  in  the  financial  centres,  the 
Secretary  can  continue  this  process.  With  an  easy  money  market 
nothing  is  more  easy  than  such  substitution  of  gold  for  greenbacks. 
So  long  as  the  exchanges  remain  favorable  it  can  be  rapidly  effected. 
When  money  becomes  dearer  the  process  must  be  arrested.  He 
must  avoid  the  dangerous  rock  on  which  Mr.  Secretary  McCuLLOCH 
wrecked  his  stiff  bark.  No  business  community  will  endure  con- 
traction when  money  is  dear.  But  we  hold  that  now  contraction 
is  not  necessary.  Substitution  is  not  contraction.  The  measure  of 
value  is  neither  lengthened  nor  shortened.  It  is  only  strengthened. 

Why  should  such  an  opportunity  be  neglected  ?  Is  not  the  ex- 
periment worth  making  when  the  possible  advantages  are  con- 
sidered ?  The  renewal  of  the  sales  of  gold  by  the  Secretary  is  the 
first  imperative  step.  By  continuing  the  hoard  of  his  Customs  re- 
ceipts he  stands  in  the  way  of  resumption.  He  is  to-day  the  only 
block  in  the  road  to  specie  resumption.  By  his  negative  action  in 
his  arrest  of  sales  of  the  surplus  coin  of  the  Treasury  he  is  assuming  a 
grave  responsibility.  Does  he  not  see  that  his  inaction  gives  time 
and  occasion  for  a  renewal  of  that  speculative  power  which  has 
already  brought  us  into  such  serious  difficulty.  Let  him  so  act  that 
the  coin  now  on  its  way  from  Europe  will  find  its  place  in  the  vaults 
of  our  savings  banks  and  the  pockets  of  the  people.  Let  us  once 
more  become  familiar  with  the  time-honored  emblem  of  our  national 
power.  He  may  be  sure  that  the  American  people  will  pardon  him 
many  shortcomings  if  he  restore  the  national  coin  to  general  use. 
Until  Congress  meet,  the  Secretary  holds  this  great  power — the 
sustaining  of  the  present  unnatural  value  of  gold  or  its  restoration 
to  the  currency.  Can  he  hesitate  ? 

KNICKERBOCKER. 

NEW-YORK,  October  4,  1873. 


Letter  No.  Y. 
NO  FURTHER  INFLATION. 

THE  crisis  is  passed — the  panic  has  run  its  course ;  confidence  is 
returning.  There  will  be,  doubtless,  a  great  deal  of  individual  suf- 
fering, a  long  train  of  minor  disasters.  It  is  impossible  that  it 


16 

should  be  otherwise.  Such  is  the  unavoidable  result  of  financial 
spasms.  There  will  still  be  large  and  long-continued  liquidations. 
Many  needed  and  worthy  enterprises  must  be  for  a  period  sus- 
pended, and  new  projects  must  be  adjourned  for  a  more  favorable 
season.  But  the  great  and  necessary  business  of  the  country  is 
gradually  renewing  its  former  current.  The  prudent  still  husband 
their  resources,  and  move  with  caution.  Others,  more  venturesome, 
only  wait  the  returning  breeze  to  spread  full  sail  once  more. 

Severe  as  the  lesson  has  been  to  all — sudden  as  the  awakening 
from  a  blind  trust  in  the  perpetual  postponement  of  the  day  of 
settlement  under  the  much-vaunted  merits  of  paper-money — it  is  a 
question  whether  even  yet  that  warning  has  aroused  the  public 
mind  to  a  true  sense  of  the  danger,  or  brought  fairly  home  to  the 
national  conscience  the  changeless,  incontrovertible  truth,  that  so 
long  as  we  make  one  of  the  family  of  commercial  nations,  we  must 
use  that  money  which  is  the  common  money  of  the  world,  or  find 
no  relief  from  the  common  fund  of  that  money  in  the  time  of  need. 

Had  our  circulating  medium  been  of  this  character,  or  approached 
to  this  standard — that  is  to  say,  did  it  now  consist  of  equal  parts  of 
coin  and  paper — the  contraction  caused  by  the  recent  sudden  lapse 
of  confidence,  the  withdrawal  of  currency  and  impaired  power  to 
perform  its  usual  functions  of  that  which  remained,  would  have 
inevitably  and  immediately  attracted  an  addition  to  its  store  of 
coin  from  foreign  nations.  This  not  being  possible,  the  business  of 
the  country  was  compelled  to  contract  itself  to  the  amount  of  cur- 
rency still  left  free.  There  was  no  hope  of  aid  from  foreign 
sources.  The  only  money  with  which  foreign  nations  could  have 
aided  us  in  our  need,  gold  and  silver,  are  no  longer  money 
with  us — they  would  only  have  served  as  an  additional  sum  of 
commodities  to  be  dealt  in,  bought  and  sold  with  the  very  currency 
which  proved  insufficient  for  already  existing  transactions,  or  rather 
such  part  of  it  as  a  timorous  public  still  left  free  for  such  purposes. 

In  a  similar  situation  of  affairs  in  England  or  France,  such  strin- 
gencies are  treated  in  a  simple  way.  The  price  of  money  is  raised. 
The  raising  of  the  bank  rate  of  discount  is  equivalent  to  a  rise  in 
such  price.  Gold  and  silver,  like  all  other  commodities,  seek  the 
market  where  they  are  most  wanted  and  find  most  profitable  em- 
ployment. From  every  quarter  the  current  of  money  sets  in  to  the 
point  where  it  may  be  used  to  best  advantage,  and  business  trans- 
actions contracting,  the  equilibrium  is  soon  restored.  The  true 
amount  of  circulating  medium  as  a  measure  of  transactions  is 
again  reached,  and  trade  resumes  its  movement  under  correct  and 


17 

normal  conditions.  Confidence  cheapens  money,  and  the  floating 
capital  which  has  corrected  the  false  relations  of  values  awaits 
another  favorable  investment.  This  natural  movement  can  only 
take  place  in  countries  where  the  circulating  medium  is  strong, 
because  largely  consisting  of  gold  and  silver,  and  where  trans- 
actions in  money  are  left  free  and  unfettered  by  restrictive  laws, 
like  those  of  Usury,  which,  to  our  cost,  still  retain  their  place  on 
our  statute-book.  The  Bank  of  England  makes  money  dear  by 
raising  its  rate  of  discount,  or  rather  raises  its  rate  of  dis- 
count as  money  becomes  or  threatens  to  become  scarce.  Our 
unfortunate  banks  can  only  make  money  dear  by  denying  it;  while, 
on  the  other  hand,  so  soon  as  they  take  this  course,  their  customers 
withhold  from  them  their  usual  deposits,  because  they  can  use  their 
money  more  profitably  in  the  open  market,  the  Usury  laws  as 
between  man  and  man  being  little  more  than  a  dead  letter. 

The  entire  inadequateness  of  a  circulating  medium  consisting 
solely  of  paper,  has  been  absolutely  demonstrated  in  the  recent 
crisis.  To  what  extent  prices  would  have  fallen,  and  what  further 
terrible  calamity  would  have  been  endured,  but  for  the  happy  chance 
that  there  was  a  moderate  sum  of  currency  at  the  disposal  of  the 
Treasury  at  the  critical  moment,  need  not  now  be  inquired.  He 
who  has  fallen  half  way  down  a  precipice  takes  more  thought  as  to 
how  he  may  again  reach  the  surface  than  of  the  extent  of  the  deeper 
depth  below. 

Yet,  strange  as  it  may  seem,  there  is  at  this  very  moment  a  plot 
forming  to  press  upon  Congress  at  its  next  session  the  issue  of  one 
hundred  millions  more  of  greenbacks,  under  the  plea  that  we  can- 
not carry  on  the  business  of  the  country  with  the  present  sum  of 
seven  hundred  millions.  There  is  no  secrecy  about  this  scheme ;  it 
is  talked  of  in  more  than  one  influential  quarter.  What  is  equally 
serious — the  press,  which  of  late  has  been  almost  unanimous  in  its 
urgent  demand  for  measures  toward  resumption,  has  fallen  under 
the  spell,  and  no  more  is  heard  about  specie  resumption. 

Are  men  crazy  that  they  propose  such  schemes  ?  More  inflation  ! 
Another  hundred  millions  of  irredeemable  money  !  Where  is  this 
to  end  ?  When  this  hundred  millions  is  fairly  afloat,  what  then  ? 
Why  then  another  and  another,  until  our  worthless  currency  will 
have  about  as  much  purchasing  power  as  the  old  French  assignat, 
or  the  promises  of  the  darkest  hour  of  our  revolutionary  struggle. 
For  several  years,  indeed  ever  since  the  power  of  contraction  was 
taken  away  from  the  Secretary,  the  country  has  been  lured  on  by 
the  delusive  promise  that  when  we  had  "  grown  up"  to  the  present 


18 

circulating  medium,  specie  payment  would  be  resumed ;  and  now 
that  the  country  has  grown  up  to  the  present  circulating  medium, 
it  is  to  be  deprived  of  the  reward  of  its  patient  sacrifice,  and  is  told 
by  these  patent  currency  doctors  that  it  must  "grow  up"  to  a  me- 
dium one  hundred  millions  greater  than  that  now  existing.  When 
are  we  to  stop  "  growing  up  ?" 

I  greatly  mistake  the  temper  of  our  people  if  they  will  for  a  mo- 
ment sanction  such  a  breach  of  faith  as  this.  There  are  signs  on 
every  side  that  they  are  awakening  to  a  thorough  understanding  of 
this  question.  They  begin  to  see  that  national  expansion  brings  in 
its  train  individual  expansion ;  that  a  diluted  currency  brings  wa- 
tered stocks.  Already,  in  this  State,  one  of  the  great  political  par- 
ties has  put  forward,  as  the  very  corner-stone  of  its  platform,  the 
imperative  need  of  a  return  to  specie  payment. 

If  it  be  true  that  the  business  of  the  country  has  grown  up  to 
the  present  circulating  medium,  it  is  now  the  time  to  strengthen 
that  circulating  medium  by  a  large  introduction  of  coin.  As  we 
have  already  shown,  no  contraction  is  necessary,  only  a  gradual 
withdrawal  by  the  Secretary  of  the  greenback  currency  ;  when  gold 
is  at  par  it  will  flow  into  the  vacuum  thus  created.  In  other  words, 
a  substitution  of  coin  for  greenbacks.  When  the  greenbacks  have 
been  withdrawn,  and  gold  has  taken  their  place,  legal  resumption 
may  take  place.  If,  then,  the  country  prefer  to  replace  the  national 
bank  currency  by  greenbacks,  made  convertible  into  coin  at  the 
Sub-Treasuries,  the  exchange  may  be  made  by  a  simple  process. 
The  Secretary  could  redeem,  with  this  convertible  currency,  the 
bonds  now  lodged  with  the  Treasury  by  the  national  banks,  and 
call  in  and  cancel  the  bank  notes.  The  United  States  would  then 
possess  the  best  circulating  medium  in  the  world,  half  in  Govern- 
ment notes,  equivalent  to  and  convertible  into  coin,  and  the  other 
half  in  gold  and  silver ;  while  banks  would  be  left  to  their  legiti- 
mate business  of  discount  and  deposit  unrestricted  by  law.  But  the 
discussion  of  this  question  is  premature.  The  feasibility  of  such  an 
exchange  is  only  mentioned,  because  a  large  part  of  our  population 
look  with  aversion  upon  any  withdrawal  of  greenbacks  if  it  is  to  be 
final — who  prefer  the  Government  to  the  bank  issue,  and  object  to 
any  plan  of  finance  which  enables  one  class  of  individuals  to  profit 
by  the  currency  which  the  whole  people  make  use  of.  Such  profits, 
they  assert,  belong  to  the  whole  people.  Nowhere  is  class  legisla- 
tion so  dreaded  and  detested  as  here. 

The  immediate  question  is,  have  we  "grown  up"  to  the  present 
circulating  medium  ?    If  we  have  not,  we   surely  want  no  more 


19 

inflation  until  we  do  grow  up  to  it.  If  we  have,  we  want  the  first  step 
to  the  introduction  of  gold  into  that  medium.  I  hold  that  we  are 
ready  for  such  a  step  now.  If  there  is  no  excess  of  currency  and  no 
foreign  demand  for  coin,  gold  should  be  at  par,  and  other  values  at 
gold  values.  If  the  Secretary  will  resume  his  sales  of  gold,  this 
point  will  be  soon  established. 

No  withdrawal  of  currency  should  take  place  until  gold  be  at 
par.  The  country  is  not  in  a  situation  or  humor  to  endure  any  more 
of  the  "  heroic  treatment  "  of  Mr.  Secretary  McCuLLOCH.  It  is  now 
universally  accepted  that  the  growing-up  process  is  to  be  the 
only  treatment.  In  pursuing  his  present  policy,  the  Secretary, 
instead  of  aiding  in  the  establishment  of  the  true  value  of  gold, 
stands  absolutely  in  its  way.  The  Canadian  bankers,  who  are 
understood  to  be  the  holders  of  the  greater  part  of  the  cash  gold  in 
the  market,  must  laugh  in  their  sleeves  while  the  duty-paying  im- 
porter gradually  relieves  them  of  their  stock  at  the  rate  of  two  or 
three  millions  each  week,  and  the  Secretary  absorbs  their  sales  in  his 
Customs  receipts,  and  sustains  the  market  for  our  provincial  friends. 
Is  this  Fabian  policy  of  the  Secretary's  own  conception  ?  Who- 
ever may  be  its  prompters,  the  foreign  bankers  and  gold  speculators 
are  the  only  persons  who  find  their  account  in  the  fictitious  value  of 
gold.  Finance  is  not  an  exact  science,  and  no  one  knows  precisely 
how  much  cash  gold  there  is  on  the  market,  or  what  price  a  round 
sum,  say  of  five  millions,  would  command.  The  Secretary  holds 
the  solution  of  this  problem  in  his  own  hand.  His  silence  can  only 
be  explained  on  the  theory  of  the  Eastern  proverb,  that  "  silence  is 
golden." 

Everything  favors  resumption  now.  Our  imports  from  the  1st  of 
January  to  1st  of  October,  1873,  show  a  falling  off  of  $27,000,000 
from  those  of  the  same  period  last  year ;  our  exports  an  excess  during 
the  same  period  of  over  $48,000,000,  an  improvement  in  our  favor, 
in  exact  figures,  of  $75,871,472  for  the  first  three-quarters  of  the 
year  1873.  Of  specie,  the  exports  have  been  $41,523,011,  in  1873, 
against  $59,075,264  in  1872,  and  $69,702,111  in  1871.  This  ratio  of 
improvement  will  be  daily  increasing  for  the  remaining  quarter. 
The  recent  crisis  has  arrested  imports,  except  of  coin,  to  a  very  great 
extent,  while  every  day's  news  from  Great  Britain  and  the  Conti- 
nent points  to  even  larger  takings  of  our  breadstuffs  than  had  been 
supposed.  The  shortness  of  the  wheat  crop  seems  to  be  not  only  local 
but  continental.  A  carefully  considered  article  in  the  London  Satur- 
day Review  on  the  "  Wheat  Crop,"  estimates  "  that  England's  deficit 
is  probably  1-2,000,000,  and  that  of  France  6,000,000,  or  together 


20 

18,000,000  quarters.  England,  the  only  buyer  in  the  past  year,  has 
imported  from  all  other  countries,  France  included,  nearly  13,000,000 
quarters  of  wheat.  The  two  countries  now  require  that  quantity, 
and  fully  5,000,000  more,  between  them.  The  Question  is,  can 
this  quantity  be  obtained  ?  *  *  It  is  too  much,  however,  to  ex- 
pect America  to  more  than  double  her  exportation  of  last  year.  It 
is  improbable,  if  not  impossible,  that  she  can  so  do.  Either  France 
or  England  must  then  go  short.  There  will  be  active  competition 
between  the  merchants  of  the  two  nations  wherever  wheat  is  to  be 
had,  and  the  result  of  the  competition  will  be,  to  raise  prices. 
Bread  must  be  dear.  Whoever  goes  short,  this  country  (England) 
will  not  starve ;  but  we  shall  have  to  pay  a  high  price  for  our 
loaf." 

In  the  compensation  of  nature,  their  suffering  is  our  prosperity. 
The  day  is  not  distant  since  Great  Britain  profited  by  our  calamity. 
For  a  great  part  of  their  wants,  England  and  France  must  pay  us 
specie.  We  will  therefore  not  only  retain  our  own  large  production, 
but  receive  a  considerable  additional  supply.  Now  is  our  chance. 
If  we  neglect  this  opportunity  to  restore  our  national  finances  to  a 
sound  specie  basis,  we  shall  incur,  and  as  surely  receive,  the  con- 
tempt of  mankind.  We  may  as  well  return  to  the  aboriginal  cur- 
rency at  once,  and  establish  a  wampum  factory  at  the  capital. 
Better  this  than  continue  the  farce  of  exchanging  paper  promises, 
which  we  have  no  intention  of  performing,  now  or  hereafter,  and 
solemnly  calling  them  dollars. 

Let  us  have  no  more  inflation. 

KNICKERBOCKER. 

NEW- YORK,  October  6,  1873. 


Letter  No.  VI. 
GRADUAL  RESUMPTION. 

THE  discussion  of  the  question  of  a  return  to  specie  payment  has 
now  passed  from  the  narrow  field  of  bank  parlors  and  merchants' 
counting-rooms  to  the  broad  forum  of  public  opinion.  It  is  no  longer 
possible  to  put  off  or  stifle  this  discussion.  It  will  not  "  down  "  at 
any  man's  bidding.  It  is  to  the  press  of  the  country  that  the  people 
look  for  light  and  counsel.  This  is  the  time  to  settle  some  of  the 
main  points  in  the  argument.  When  the  premises  of  any  proposi- 


21 

tion  are  clearly  proven,  and  taken  as  proven,  the  conclusions  which 
derive  from  such  premises  are  sure  to  lodge  themselves  in  the  public 
mind.  Public  action  soon  results,  for  though  those  charged  with 
our  Government  may  fail  sometimes  to  lead  public  opinion,  they 
rarely  hesitate  to  follow  it  when  clearly  expressed. 

The  questions  now  before  the  public  are  these :  Are  specie  pay- 
ments desirable  ?  Are  specie  payments  now  practicable  ?  How 
shall  the  experiment  be  made  ? 

That  there  is  an  earnest  desire  for  a  return  to  the  use  of  coin  in 
our  currency  cannot  be  now  denied.  In  every  quarter  this  feeling 
is  shown.  The  country  has  heard  in  the  last  few  days  the  opinions 
of  the  two  Senators  from  Ohio,  one  on  the  Democratic,  the  other  on 
the  Republican  side.  The  argument  is  made  to  the  people  of  Ohio 
and  the  Western  States.  The  final  settlement  of  the  question  rests 
in  Western  hands.  They  hold  to-day,  and  will  hold  for  a  long  period, 
the  balance  of  power  on  this  continent.  Every  argument  addressed 
to  them  from  authoritative  sources  must  be  fairly  listened  to,  fairly 
weighed,  and  fairly  answered.  The  question  must  not  be  permitted 
to  pass  wholly  into  the  domain  of  political  inquiry.  It  must  not  be 
confined  within  party  limits.  Buyers  and  sellers  trade  with  each 
other  without  thought  as  to  each  other's  political  views.  The  coin 
which  should  be  the  standard  of  value  in  their  dealings  has  no  party 
color. 

Mr.  Senator  SHERMAN,  in  his  recent  speech,  made  this  important 
admission  :  "  There  are  some  defects  in  our  banking  system.  The 
first  is  that  a  greenback,  although  mighty  good,  is  not  quite  so  good 
as  gold."  And  again  :  "  We  can  go  back  to  specie  payments — we 
can  go  back  until  our  money  is  equivalent  to  gold  and  silver  coin, 
and  then  we  have  the  best  currency  in  the  world."  While  the 
Senator  proposes  no  plan  to  make  the  currency  as  "  good  as  gold," 
he  affirms  in  the  plainest  way  that  "  in  all  ages  and  in  all  countries 
it  has  got  to  be  an  axiom  in  financial  matters,  that>gold  alone  is  the 
standard  of  value,  and  the  planetary  laws  which  govern  the  universe 
are  not  more  fixed  and  absolute  in  their  sway  than  that  law  which 
demands  that  every  thing  must  be  measured  by  the  gold  standard." 
Such  are  the  weighty,  positive  declarations  of  one  of  the  Republican 
leaders.  On  the  other  hand,  his  colleague  and  political  antagonist, 
the  Democratic  Senator  from  the  same  State,  Mr.  THUEMAN,  while 
declaring  "  that  he  is  in  favor  of  a  specie  currency,  or  a  currency 
convertible  into  specie,"  and  expressing  the  "  belief  that  the  business 
of  the  country  can  never  be  carried  on  with  an  irredeemable  paper 
currency,"  is  as  silent  as  Mr.  SHERMAN  as  to  the  means  by  which 

3 


22 

this  convertibility  or  equalization  of  values  of  coin  and  paper  may 
be  established. 

But  here   the   resemblance    between    the   views   of   these   dis- 
tinguished   gentlemen    ceases.     Mr.    THUEMAN    goes   on    in    the 
strongest  terms  to  deprecate  the  "  immediate  resumption  "  of  specie 
payments  as  dangerous  in  the  extreme,  and  calculated  "  to  have 
a   most   crushing  eifect   upon  the  people  of  the  debtor  States." 
Both  of  these  gentlemen  fairly  and   squarely  declare  their  belief 
that  specie  payments  are  desirable  and  needful.     There  is  nothing 
to  controvert  in  the  argument  of  either.     In  answer  to  that  of  Mr. 
SHERMAN,  it  need  only  be  stated  that  no  resumption  can  take  place 
until  the  circulating  medium,  now  wholly  paper,  has  been  very 
greatly  strengthened  in  some  manner.     He  would  doubtless  say  by 
putting  coin  along  side  of  it,  while  the  sounder  view  seems  to  be 
that  the  true  manner  is  by  partial  withdrawal  of  currency  and  sub- 
stitution of  coin  in  its  place.     To  that  of  Mr.  THTJKMAN,  it  is  only 
necessary  to  reply  that  there  is  no  such  thing  possible  as  the  "  im- 
mediate resumption  of  specie  payments."     He  must  be  mad  indeed 
who  can  for  a  moment  imagine  that  the  Government  or  the  people 
can  solemnly  legislate  or  declare  that  they  will  hereafter  pay  specie 
to  all  who  demand  it,  when  the  proportion  of  specie  in  their  control 
to  the  extent  of  the  currency  promises  afloat  is  in  the  present  ratio. 
It  is  not  worth  while  here  to  reply  to  the  bold  theory  once  put  out, 
that  all  that  was  necessary  for  resumption  was  "  to  resume."     The 
difficulty  is  to  stay  resumed.     The  financial  history  of  nations  shows 
no  record  of  any  people  that  have  been  able  to  float  any  considerable 
amount  of  currency  with  even  an  equal  amount  of  coin  to  the  circu- 
lating medium.     There  can  be  no  other  than  gradual  resumption  by 
the  substitution  of  coin  for  a  part  of  the  currency.     As  this  substi- 
tution will  in  no  manner  change  the  amount  of  circulating  medium, 
there  will  be  no  contraction,  and  Mr.  THUBMAN'S  fears  as  to  the 
change  of  relation  between  debtor  and  creditor  may  be  dismissed 
as  idle  and  groundless. 

The  measure  of  values  is  the  circulating  medium  of  a  country — the 
values  so  measured  rise  or  fall,  as  the  measure  itself  is  enlarged  or 
lessened.  Gold  is  only  a  standard  as  it  is  used  as  a  standard. 
Were  it  not  for  our  intercourse  with  foreign  nations  we  should  have 
no  use  for  it  except  in  the  arts,  and  Gold  Boards  and  Sub-Treasuries 
would  be  needless.  But  as  yet,  the  European  and  Asiatic  nations 
have  not  adopted  the  last  American  conception,  that  gold  is  a  "  relic 
of  barbarism,"  to  be  tabooed  by  all  civilized  nations,  and  they  still 
insist  on  payment  in  gold  for  the  balance  of  account  between  their 


! 


23 

sales  to  us  and  our  purchases  from  them.  Now,  so  long  as  we 
content  ourselves  to  receive  at  home  among  ourselves  a  paper  cur- 
rency in  place  of  coin,  and  to  pay  our  foreign  creditors  in  gold  and 
silver,  we  may  do  so  ;  only  as  their  money  is  not  our  money,  we 
need  not  expect  that  aid  which  they  mutually  extend  to  each 
other  in  times  of  distress.  We  have  placed  ourselves  out  of  the 
pale  of  their  finance. 

The  prices  of  the  articles  we  exchange  among  ourselves,  giving 
and  taking  this  paper  money  as  the  medium  of  transactions,  will 
rise  and  fall  as  we  increase  or  diminish  the  amount  of  such  paper 
money ;  or  if  we  do  neither,  but  hold  the  amount  at  a  fixed  limit, 
prices  will  fall,  as  the  increasing  business  of  the  country  consequent 
on  its  rapid  development  and  prosperity  causes  an  increased  demand 
for  the  currency  itself.  That  is  what  is  called  the  "  growing  up" 
process.  When  the  currency  is  not  in  excess,  prices  should  not  rule 
above  those  which  prevail  when  gold  is  at  par.  And  here  it  must 
not  be  lost  sight  of,  that  present  gold  prices  are  not  those  which 
ruled  before  the  war,  either  here  or  in  any  part  of  the  world.  Prices 
have  risen  every  where ;  in  Europe  and  Asia  as  well  as  in  America. 
The  enormous  increase  in  the  world's  store  of  gold  since  1848  has 
changed  the  financial  face  of  the  world,  and  caused  a  general  ad- 
vance in  values  to  keep  pace  with  the  increase  in  the  measure  of 
values.  This  advance  has  been  still  further  stimulated  by  the  ra- 
pidity of  modern  communication,  which  has  greatly  reduced  the  ne- 
cessity of  any  considerable  movement  of  coin  itself,  and  left  nearly 
the  entire  sum  existing  at  the  free  service  of  commercial  exchanges. 
No  such  fall  in  prices  here  as  many  have  feared  need  be  looked  for. 
The  fact  of  a  general  rise  abroad  will  be  readily  acknowledged  by 
all  those  who  have  recently  visited  the  Continent.  Our  fall  need 
only  meet  that  rise. 

For  many  years  the  amount  of  our  circulating  medium  has  been 
in  excess  of  the  reasonable  needs  of  the  country.  It  is  now  claimed, 
and  it  seems  justly,  that  the  business  of  the  country  fully  demands 
its  present  medium  of  seven  hundred  millions.  There  must,  there- 
fore, be  no  contraction  of  this  medium.  There  must  only  be  a  sub- 
stitution of  gold  for  a  part  of  that  medium.  This  is  gradual  re- 
sumption.  This  is  the  only  time  since  the  close  of  the  war  when 
the  condition  of  our  foreign  exchanges  has  permitted  a  serious 
thought  of  the  possibility  of  such  a  substitution.  Nothing  but  the 
great  improvement  in  our  situation  toward  foreign  countries, 
and  the  certainty  that  for  a  considerable  period  this  improvement 


24 

must  continue  in  a  largely-increasing  ratio,  renders  such  a  plan  prac- 
ticable to-day. 

After  long  suspension,  in  which  values,  no  longer  measured  by 
a  gold  standard,  become  irregular  and  unsettled,  an  immediate  res- 
toration of  their  true  relations  is  difficult  and  unequal.  It  was  a 
saying  of  that  wisest  and  most  sagacious  of  American  statesmen, 
ALBERT  GALLATIN,  the  financial  Nestor  by  whose  counsels  the 
country  was  led  through  the  revulsion  of  1837  up  to  specie  pay- 
ment, "  that  the  agony  of  resumption  is  far  more  terrible  than  the 
agony  of  suspension ;"  that  it  is  harder  to  submit  to  a  loss  which 
may  be  avoided,  or  postponed,  or  perhaps  shifted  to  another's 
shoulders,  to  aid  resumption,  than  to  far  greater  losses  to  avoid,  sus- 
pension. The  moral  tone,  once  impaired,  is  with  difficulty  restored, 
either  in  individuals  or  communities. 

Fortunately,  there  is  no  need  of  such  suffering  now.  The  worst 
has  been  rapidly  passed.  The  contraction  of  values  has  been  sharp 
and  sudden,  but  thorough,  The  deposite  line  of  the  New- York 
>>anks  alone  has  fallen  off  $51,000,000  since  the  13th  September,  a 
contraction  of  twenty-five  per  cent.  There  can  be  no  further  con- 
traction. There  will  be  no  further  general  decline  in  values.  There 
will  be  surely  an  equalization  between  those  which  have  fallen  too 
low  and  those  which  have  not  yet  felt  their  share  of  the  depres- 
sion. It  may  safely  be  said  that  no  values  have  wholly  escaped. 
What  are  we  to  reap  from  this  sudden  restoration  of  true  values  ? 
Shall  we  hold  steady  where  we  are,  and  gradually  recover  our  old 
financial  standing  by  gradual  resumption,  or  shall  we  drift  along 
through  another  expansion  and  another  inflation,  to  another  panic  ? 
Can  there  be  any  hesitation  ?  Surely,  we  will  choose  the  better 
path — that  which  leads  to  national  honor  and  sure  prosperity.  The 
long-promised  day  has  at  last  dawned — the  day  when,  by  ten  years 
of  unexampled  prosperity,  the  business  of  the  country  has  grown 
up  to  the  full  measure  of  the  circulating  medium.  Shall  we  not 
now  endeavor  to  harmonize  our  system  with  the  systems  of  all  other 
civilized  nations — to  return  to  gold  as  a  standard  of  values  ? 

It  has  been  in  the  power  of  the  Secretary  of  the  Treasury  at  any 
time  since  the  beginning  of  the  panic,  since  the  17th  September,  to 
ascertain  the  value  of  gold — to  enable  the  country  to  see  and  to 
know  just  how  much  difference  really  exists  between  the  value  of 
our  currency  and  of  coin — to  fix  precisely  the  excess  of  our  cir- 
culating medium.  What  relief  it  would  have  afforded  to  the  country 
to  know  that  it  was  on  the  verge  of  specie  payment — that  at  last 
there  was  to  be  a  certain  and  definite  element  in  our  finances — what 


25 

a  consolation  for  it  in  its  hours  of  suffering  !     It  has  not  suited  the 
Secretary  to  adopt  this  course. 

It  has  been  also  in  the  power  of  the  Secretary  to  uphold  the  price 
of  gold,  and  sustain  the  hands  of  those  whose  business  is  a  specula- 
tion in  its  changing  values.  No  positive  interference  was  necessary 
— the  country  would  not  have  brooked  such  interference.  He  had 
only  to  withdraw  the  sales  of  gold  he  had  advertised ;  to  listen 
in  silence,  without  demur,  to  the  rumors  of  the  dangers  and  em- 
barrassments of  the  Treasury,  by  which  the  speculators  bolstered 
their  speculations  upon  nominal  transactions ;  and  finally,  as  con- 
fidence was  renewed,  and  importers  commenced  to  withdraw  their 
merchandise,  to  absorb  and  hold  his  customs  receipts,  and  thus  help 
to  maintain  the  artificial  price.  This  has  been  the  course  of  the 
Secretary. 

The  country  cares  little  now  for  what  he  does.  The  matter  has 
passed  beyond  his  control.  He  had  the  power  to  lead  the  move- 
ment, to  direct  it  in  the  proper  path.  The  gold  now  on  its  way 
here  is  pouring  daily  into  the  mint  for  coinage.  Had  the  Secretary 
shown  any  courage,  the  greater  part  of  the  ten  millions  which  it  is 
announced  must  pass  through  new  coinage,  would  go  directly  into 
the  hands  of  the  people.  All  the  gold  on  the  way  to  this  country 
must  find  a  market  here.  Who  can  hold  it  ?  The  foreign  bankers 
have  not  the  power  if  they  have  the  inclination.  The  acceptances 
of  the  best  of  them,  even  ninety-day  bills,  cannot  find  takers  at  one 
and  a  quarter  per  cent,  per  month — sixteen  per  cent,  per  annum. 
Their  credit  is  undoubted,  but  their  available  means  are  already 
exhausted  in  the  purchase  of  produce  bills.  Their  credit  will  not 
move  the  produce  now  on  the  market.  They  must  wait  before  they 
can  renew  their  purchases,  until  they  find  a  demand  for  their  bills 
which,  as  yet,  comes  slowly  from,  importers,  or  receive  coin  from 
abroad. 

It  is  greatly  to  be  regretted  that  some  means  were  not  devised 
by  the  Secretary  to  import  gold  through  a  syndicate  of  bankers, 
and  to  place  an  immediate  and  large  sum — twenty  to  twenty-five 
millions  of  currency — in  their  hands  for  use  in  the  purchase  of  pro- 
duce bills.  The  relief  to  the  West  would  have  been  instant,  and 
the  general  effect  salutary.  We  could  then  have  marketed  a 
great  part  of  the  crops  before  frost,  or  at  least  brought  it  to  tide- 
water. Already  there  are  signs  of  an  early  Winter.  Snow  fell  in 
Pennsylvania  yesterday. 

The  coin  must  come,  and  gold  will  fall  to  par  in  spite  of  the  Sec- 
retary. His  brief  authority  will  be  powerless  to  sustain  the  price 


26 

against  arrivals  for  a  market,  and  none  will  feel  tempted  to  buy 
gold  against  such  importations  as  are  now  promised.  The  Secre- 
tary has  been  measured  in  the  balance  and  found  wanting.  Never 
in  the  history  of  our  country  has  so  great  an  occasion  been  so  hope- 
lessly neglected.  Whatever  other  fame  the  Secretary  may  achieve, 
that  of  a  finance  minister  has  passed  from  him  forever. 

When  gold  falls  to  par,  arid  there  is  no  longer  profit  or  hope  of 
profit  in  holding  it,  it  will  pass  from  hand  to  hand  as  of  old.  But 
this  is  not  resumption,  nor  yet  a  single  step  toward  it.  It  can  only 
be  held  in  the  currency  by  the  provision  of  a  place  for  its  use. 
This  can  only  come  from  legislation.  The  appeal  will  be  taken 
from  the  Secretary  to  Congress.  When  this  important  session  is 
opened,  there  will  be  found  two  distinct  propositions  awaiting  its 
approval,  and  the  country  marshaled  behind  the  one  or  the  other  in 
columns  in  which  political  opinions  will  have  no  place.  From  the 
one  will  rise  the  cry  for  more  inflation,  more  greenbacks ;  from  the 
other  a  stern  demand  for  a  gradual  approach  to  coin.  There 
need  be  no  doubt  of  the  people's  position.  Every  man  who  lives  by 
his  daily  labor — the  bone  and  sinew  of  the  country,  the  American 
artisan,  the  Irish  laborer,  the  German  agriculturist — has  an  imme- 
diate daily  interest  in  a  return  of  specie  payment ;  only  let  it  be 
made  clear  to  them  that  there  is  to  be  immediate  resumption,  no 
contraction  and  suffering,  but  only  a  gradual  and  careful  substitu- 
tion of  coin  for  paper,  continued  when  gold  is  at  par  and  money  is 
plenty,  arrested  when  either  gold  advances  or  money  becomes  dear, 
and  there  can  be  no  division  of  opinion. 

It  is  now  of  the  greatest  importance  to  fully  put  before  the  people 
the  entire  feasibility  of  this  plan  of  gradual  resumption,  and  to  de- 
stroy the  popular  impression  that  gold  prices  mean  ruin.  It  is  a  sad 
thing,  indeed,  that  the  very  word  "  specie-payment "  has  been  so 
used  before  the  people  that  it  has  become  as  much  a  terror  as  the 
red  flag  to  France — a  terrible  banner  to  be  waved  before  the  eyes 
of  the  people  on  every  occasion  when  the  interests  of  a  class  are  to 
be  protected  or  sustained  at  the  expense  of  the  whole. 

If  the  inflationists  are  allowed  to  have  their  way  they  will  so  cor- 
rupt the  public  conscience  that  the  day  may  not  be  distant  when  re- 
sumptionists  will  fare  as  badly  as  abolitionists,  in  a  time  not  yet  be- 
yond our  memory ;  and  one  who  expresses  a  doubt  about  the 
miraculous  virtues  of  paper  money  be  chased  about  the  streets  as 
those  other  sufferers,  who  dared  to  doubt  the  divine  origin  of  the  in- 
stitution of  human  slavery.  Dii  avertite  omen  ! 

KNICKERBOCKER. 

NEW-YORK,  October  8,  1873. 


27 


Letter  No.  VII. 
THE  APPROACH  TO  SPECIE  PAYMENT. 

FROM  the  close  of  its  war  it  has  been  the  policy  of  the  Govern- 
ment, under  the  Republican  administration,  to  restore  specie  pay- 
ment to  the  country. 

Now  that  this  policy  is  on  the  verge  of  success,  it  is  not  un- 
profitable to  look  over  the  extent  of  the  ground  already  traveled, 
and  to  note  with  what  steady  and  firm  courage  it  has  been  pursued, 
so  the  country  may  better  measure  the  distance  yet  to  be  gone  over, 
and  nerve  itself  for  the  last  and  crowning  effort. 

Mr.  Secretary  McCuLLOce,  in  his  able  and  lucid  report  of  1867, 
states  the  public  debt  of  the  United  States  to  have  reached  its 
highest  point  on  the  31st  August,  1865,  when  it  stood  at 
$2,757,689,571  43.  The  October  statement  of  Mr.  Secretary  RICH- 
AKDSOX  states  the  total  indebtedness,  on  the  31st  September,  1873,  as 
at  $2,138,793,898  17.  In  both  statements  the  cash  in  the  Treasury 
is  deducted.  A  total  reduction  in  eight  years  of  $618,895,673  26. 
The  history  of  the  finances  of  the  world  shows  no  record  of  any 
such  remarkable  feat  as  this.  Alone  it  stands,  and  will  stand 
to  the  honor  of  the  able  men  who  have  conducted  the  national 
finances,  and  an  imperishable  proof  of  the  boundless  resources  of 
the  country  itself  and  the  inflexible  courage  of  our  people. 

It  is  upon  these  resources  and  this  courage  that  the  hope  of  a 
finish  of  the  labor  in  an  early  return  to  specie  payment  is  now 
founded. 

A  short  analysis  will  show  of  what  the  debt  consisted  at  the  time 
of  its  greatest  extent,  and  to  what  it  is  now  reduced. 

On  the  31st  of  August,  1865,  there  were  of 

Funded  and  matured  debt, $1,111,071,211  89 

Seven-thirty  notes, 830,000,000  00 

Temporary  loans,  certificates  of  indebtedness,  &c., 443,220,103  16 

United  States  greenbacks  and  fractional  currency, 459,505,311  51 


$2,843,796,626  56 
Less  cash  in  Treasury,  minus  unpaid  requisitions, 86,107,055  13 


Total  debt  United  States, $2,757,689,571  43 


28 
On  the  31st  September,  1873,  there  were  of 

Funded  debt,  interest  in  coin, $1,723,567,500  00 

Funded  debt,  in  lawful  money, 14,000,000  00 

Matured  debt, 15,756,130  26 

Certificates  of  indebtedness,. 678,000  00 

Certificates  of  deposits 11,250,000  00 

Greenbacks  and  fractional  currency, 402,309,134  03 

Unpaid  interest, 32,083,523  46 


$2,199,644,287  75 
Less  cash  in  Treasury, 60,850,389  58 


Total  debt  United  States, $2,138,793,898  17 

The  first  measure  of  Mr.  Secretary  McCuLLOCH,  on  taking  charge 
of  the  Department,  was  to  get  rid  of  the  floating  debt,  which,  in  its 
various  forms,  clogged  the  wheels  of  the  Treasury,  by  paying  off 
what  was  possible  and  funding  the  balance.  His  next,  to  fund  the 
general  debt  as  far  as  practicable.  For  this  great  measure  of  con- 
verting the  $800,000,000  of  seven-thirty  obligations  into  gold  bonds 
he  has  been  as  widely  blamed  on  the  one  hand  as  he  has  been 
praised  on  the  other.  "  But  for  this  step,"  a  recent  critic  has  re- 
marked of  him,  "  he  might  have  been  called  a  great  finance  minis- 
ter." But  this  very  measure  is  the  great  measure  of  his  career. 
By  it  he  brought  American  credit  up  to  its  present  high  standard 
in  the  money  markets  of  the  world.  Seeing  from  the  first  that 
sooner  or  later  the  finances  of  the  United  States  must  be  put  upon 
the  same  level  as  those  of  other  nations,  and  aware  of  the  difficulties 
in  the  way  of  a  return  to  specie  payment,  he  resolved  to  place  the 
bonds  of  the  Government  at  once  upon  that  basis.  No  greater 
proof  of  the  wisdom  of  his  policy  need  be  asked,  than  the  favored 
and  firm  hold  that  these  obligations  now  have  among  foreign  na- 
tions— a  hold  they  could  not  have  maintained  on  a  currency  basis. 
Satisfied  as  the  European  holder  might  be  as  to  the  ultimate  value 
of  his  investment,  he  looked  naturally  to  a  specific  coin  interest. 
This  the  conversion  from  the  currency  obligation  to  a  gold  bond 
provided. 

The  next  step  of  the  Secretary  was  a  resolute  effort  to  contract 
the  currency,  and  bring  it  back  as  far  as  possible  to  its  normal 
state ;  in  other  words,  to  reduce  the  circulating  medium  to  the 
sum  absolutely  necessary  for  the  transaction  of  the  business  of  the 
country. 

By  reference  to  the  report  of  August  31,  1865,  it  will  be  found 
that  the  circulating  medium  then  consisted  of 


29 

United  States  notes,  greenbacks  and  fractional  currency, $459,505/311  51 

National  Bank  notes  and  State  Bank  issues,  as  by  Comptroller's 
report,  October  1,  1865, 250,189,478  00 

Total, $709,694,789  51 

To  this  amount  must  be  added  the  sum  of  five  per  cent,  legal 
tender  notes,  and  of  certificates  of  indebtedness,  &c.,  shown  as  above 
to  amount  to  $443,220,103  16,  in  all  a  sum  of  $1,152,914,892  67. 
This,  then,  was  the  circulating  medium  of  the  country  at  the  time 
of  its  greatest  expansion  ;  by  it  all  prices  were  measured. 

After  the  taking  in  of  the  various  kinds  of  certificates,  all  which 
served  the  purpose  of  currency  in  one  form  or  another,  Mr.  McCuL- 
LOCH  begun  to  take  in  the  greenbacks  themselves,  and  continued 
until  in  December,  1867,  Congress  formally  stopped  any  further  con- 
traction. From  the  1st  of  August  to  the  15th  November,  1867,  the 
time  of  his  greatest  contraction  of  greenbacks,  the  complaints  of  the 
Western  country  were  unceasing  against  the  policy  of  the  Secre- 
tary, and,  indeed,  if  there  be  a  fault  to  be  found  with  his  direction 
of  the  finances,  it  is  in  that  he  clung  so  inflexibly  to  a  fixed  and 
unyielding  policy.  He  insisted  upon  contraction  without  regard  to 
the  demands  of  the  trade  of  the  country  or  the  position  of  the  money 
market.  From  his  experience  future  Secretaries  may  take  note,  that 
while  no  complaints  are  likely  to  arise  against  contraction  when 
money  is  cheap,  no  country  which,  by  the  representative  system, 
holds  the  power  in  its  own  hands,  and  can  confine  the  action  of  its 
finance  ministers  within  the  limits  of  its  will,  is  likely  to  consent  to 
a  contraction  of  its  currency  when  money  is  dear. 

The  Treasury  statement  of  July,  1868,  shows  to  what  extent  the 
circulating  medium  had  been  then  contracted.  It  then  consisted  of — 

United  States  notes,  greenbacks  and  fractional  currency, $388,768,674  75 

National  bank  notes  outstanding  1st  November,  18G7, 299,103,996  00 

Total, $687,872,670  75 

To  which  we  add  the  sum  of  temporary  loan  certificates  and  other 
notes  serving  the  purposes  of  currency,  amounting  to  $(,)2,6S7,442  64, 
and  the  sum  of  the  circulating  medium  will  be  found  to  have  then 
reached  $780,560,113  39,  and  shows  a  contraction  by  the  Secretary 
of  8372,354,779  28  in  its  total  amount.  This  was  pointed  out  during 
the  debates  of  the  Board  of  Trade  Convention  which  met  at  Boston 
in  the  spring  of  1868.  An  article  in  the  Atlantic  Monthly,  for  May 
of  this  year,  renews  the  same  argument. 

This  was  the  first  approach  to  specie  payment.     The  country  at 


30 

large  had  felt  the  pressure  of  the  screw,  but  had  not  been  able  to 
discern  precisely  from  what  quarter  the  pinch  came,  the  contraction 
being  partly  those  outside  forms  of  Treasury  obligations,  which, 
though  not  currency  in  the  strict  acceptation  of  the  word,  were 
still  used  as  such  in  the  larger  transactions  of  trade  and  financial 
exchange.  When,  in  a  time  of  general  pressure,  the  currency  itself 
became  the  subject  of  the  pruning  knife,  the  country  not  only  felt 
the  knife,  but  saw  how  it  was  handled,  and  refused  to  submit  longer 
to  the  "  heroic  treatment."  Up  to  this  period,  July,  1868,  it  will 
be  seen  that  the  debt  itself,  that  is,  the  funded  debt,  though  mate- 
rially re-arranged,  had  been  slightly  increased.  In  July,  1865,  the 
sum  of  the  indebtedness  not  used  as  currency  was  $1,931,071,211  89, 
of  which  $830,000,000  were  7-30  Treasury  notes.  In  1868,  July, 
the  same  class  of  debt  reached  $2,154,864,847  28,  of  which 
$177,000,000  and  some  fractions  of  7-30  Treasury  notes,  an  increase 
of  $200,000,000.  During  all  this  period  the  entire  indebtedness  of 
the  Treasury  had  fallen  from  $2,757,689,571  43  to  $2,636,320,964  67, 
a  decrease  of  $121,368,606  76. 

Checked  in  his  efforts  to  approach  further  to  specie  payment  by 
direct  contraction,  the  country  having  distinctly  shown  its  deter- 
mination to  "  grow  up  "  to  the  existing  circulation  without  further 
change,  Mr.  McCuLLocn  set  himself  to  work  to  reduce  the  debt 
itself.  The  statement  of  July,  1869,  made  shortly  after  he  left  office, 
returned  the  amount  as  then  outstanding  at  $2,489,002,480  58,  a  total 
reduction  since  the  inauguration  of  his  policy  of  $294,423,398  63. 
The  country  will  some  day  recognise  the  full  measure  of  the  ser- 
vices that  this  brave  Secretary  rendered  in  the  beginning  of  such  a 
wise  policy. 

The  administration  of  Gen.  GRANT  under  Mr.  BOUTWELL  followed 
the  policy  of  its  predecessors,  leaving  the  currency  untouched  and 
continuing  the  approach  to  specie  payment  by  the  collateral  road 
of  a  reduction  of  Government  indebtedness.  On  the  1st  of  July, 
1873,  there  had  been  a  still  further  reduction  of  indebtedness  of 
$339,038,607. 

Mr.  Secretary  RICHARDSON  has  continued  faithfully  and  bravely 
in  the  same  direction.  His  reduction  since  July  alone  reaches  the 
sum  of  $11,169,975;  the  total  reduction  since  1865  reaching  the 
sum  of  $618,895,673  26,  and  leaving  the  debt  within  the  easily- 
managed  figure  of  a  little  over  two  thousand  millions.  This  has 
been  the  second  approach  to  specie  payment. 

The  country  is  now  ready  for  the  third  great  series  of  steps 
toward  resumption.  If  we  have  now  "  grown  up  "  to  the  sum  of  our 


31 

circulating  medium,  now  is  the  time  to  prepare  to  introduce  some 
solid  strength  into  that  medium.  When  gold  and  currency  float  at 
par  together  and  money  is  abundant,  a  gradual  withdrawal  of  cur- 
rency will  not  be  felt  since  gold  will  fill  its  place.  Values  will  re- 
main unchanged  and  resumption  will  gradually  become  possible. 
When  gold  has  fairly  taken  its  place  in  sufficient  amount  to  warrant 
the  experiment,  there  may  be  legal  resumption,  and  the  people  may 
then  decide  which  of  the  two  currencies  they  prefer — greenbacks  or 
national  bank  notes.  The  exchange  of  greenbacks  for  the  national 
bank  currency  will  be  easy.  The  Treasury  will  only  have  to  re- 
deem the  bonds  on  which  the  bank  issues  are  based,  paying  for 
them  with  a  convertible  greenback  currency,  which  would  thus  be- 
come the  only  paper  money  in  circulation,  and  by  the  same  process 
extinguish  $350,000,000  of  the  United  States  debt— a  desirable 
financial  operation  in  itself. 

Are  we  ready  for  this  last  step — the  third  approach  to  specie  pay- 
ment ¥  It  seems  that  we  are  not  far  from  it.  Our  exports  are 
enormous ;  our  imports  are  light,  and  promise  to  be  small  for  some 
time.  The  credit  of  importers  will  not  allow  of  other  result — they 
perforce  must  contract  their  business.  Gold  is  falling,  and  would 
long  ago  have  touched  par,  or  a  point  near  it,  but  for  the  mistaken 
policy  of  the  Secretary.  The  October  statement  shows  that  while 
his  gold  balance  fell  from  $87,000,000,  as  it  stood  Sept.  1st,  to 
$80,000,000,  as  on  the  1st  of  October,  the  portion  of  the  coin  be- 
longing to  the  Treasury  increased  from  $42,000,000  to  $46,000,000, 
and  that  while  the  coin  certificates  were  called  for  to  the  extent  of 
$10,000,000,  the  real  gold  strength  of  the  Treasury  increased 
$4,000,000 — about  the  amount  of  his  customs  receipts. 

Before  the  meeting  of  Congress  gold  will  probably  be  floating  at 
par.  The  Treasury  can  only  absorb  a  moderate  amount — the  bal- 
ance must  take  its  chance  of  the  market.  It  cannot  escape  us, 
unless  we  again  inflate  the  currency.  The  Secretary  may  yet  find 
no  better  use  for  his  coin  than  to  redeem  the  amount  taken  from 
the  famous  reserve.  He  cannot  use  it  to  a  better  purpose. 

It  will  be  for  Congress  to  make  such  legislation  as  wilt  then 
authorize  the  Secretary  to  withdraw  his  greenbacks  so  fast  as  coin 
is  at  hand  to  replace  them,*  and  thus  take  the  final  step  in  the 
approach  to  specie  payment. 

There  can  be  no  doubt  that  the  Republican  Administration,  which 
has  so  steadily  held  this  object  in  view,  will  not  now  fail  either  in 
the  wisdom  or  the  courage  to  complete  its  work. 

KNICKEKBOCKEB. 
NEW-YOKK,  October  10,  1873. 


32 


Letter  No.  VIII. 
THE  TRUE  PLAN  FOR  RESUMPTION. 

THE  temper  of  the  Press  which,  if  not  always  ready  to  lead,  is 
sure  to  follow  the  drift  of  public  opinion,  shows  clearly  that  the 
question  of  specie  payment  has  lodged  itself  in  the  mind  of  the 
people.  There  is  a  wide-spread  belief  in  the  present  practicability 
of  specie  payment,  and  symptoms  of  an  anxious  longing  for  this 
most  desirable  result,  accompanied,  it  is  not  to  be  denied,  with 
many  a  sign  of  dread  of  the  suffering  it  may  entail.  There  is  an 
instinctive  fear  that  specie  payment  means  decline  in  values,  loss  of 
property,  falling  perhaps  where  least  looked  for ;  witli  all  this  a 
growing  determination  to  face  the  danger,  to  grapple  with  it,  and 
overcome  it. 

Specie  payment  will  be  the  one  measure  of  the  coming  session. 
It  is  already  announced  that  President  GRANT  will  make  this  sub- 
ject a  part  of  his  Message  to  Congress,  and  recommend  some  prac- 
tical measure  for  its  consideration.  The  question  is  not,  then,  of 
the  merits  of  specie  payment,  but  of  the  plan  by  which  it  may  be 
carried  into  effect. 

Several  plans  of  resumption  have  been  brought  forward. 

The  first  plan,  that  to  which  all  nations  have  hitherto  had  resort 
in  similar  stress,  was  that  originally  proposed  by  Mr.  Secretary 
McCcxLocH  in  his  report  of  30th  November,  1867.  He  stated  that 
he  would  not  fix  the  exact  time  of  resumption,  yet  that  under 
favorable  circumstances  "  it  should  not  be  delayed  beyond  the  1st 
January,  or,  at  the  furthest,  the  1st  July,  1869."  To  this  end  as  a 
chief  measure  he  proposed  to  Congress  "  the  funding  or  payment  of 
the  balance  of  interest-bearing  notes  and  a  continued  contraction  of 
the  paper  currency"  But  while  Congress  listened  with  willing  ear 
to  his  wise  scheme  of  taking  up  the  interest-bearing  notes,  they 
absolutely  denied  his  urgent  request  to  continue  his  contraction 
policy,  and  passed'  a  law  to  suspend  the  further  reduction  of  the 
currency.  It  was  resolved  upon  to  wait  until  the  progress  and 
prosperity  of  the  country  had  expanded  its  business  to  the  measure 
of  its  currency — until  it  had  "  grown  up  "  to  it. 

It  is  worth  while  now  only  to  mark  at  what  stage  of  his  contrac- 
tion policy  Mr.  Secretary  McCuLLOCH  thought  that  specie  payment 


33 

might  be  resumed,  and  thereby  to  estimate  how  much  paper  cur- 
rency he  judged  could  be  safely  floated.  He  had  previously  stated 
in  his  December  report,  1865,  that  it  would  not  be  necessary  to 
retire  more  than  one,  or  at  most  two  hundred  millions  of  United 
States  notes  before  the  desired  result  would  be  obtained.  The 
amount  of  paper  circulation,  he  stated  in  the  same  report  to  be,  on 
Oct.  31,  1865  : 

United  States  notes  and  fractional  currency, $454,218,038  20 

Notes  of  national  banks, 185,000,000  00 

State  bank  notes  outstanding, 65,000,000  00 

Total, $704,218,038  20 

In  other  words,  Mr.  McCuLLOCH  was  then  of  opinion  that  the  par 
of  coin  could  be  maintained  with  a  paper  circulation  of  $500,000,000. 
»  In  November,  1867,  when  he  expressed  the  opinion  that  resump- 
tion could  take  place  at  the  furthest  the  1st  July,  1869,  the  currency 
stood,  by  his  statement,  at — 

United  States  notes  and  fractional  currency, $387,871,477  39 

National  bank  notes, 299,103,91)6  00 


Total, $686,975,473  39 

But  a  condition  of  resumption  in  his  policy  was  a  still  further 
contraction  of  the  paper  issues.  He  could  scarcely  expect  Congress 
to  permit  him  to  contract  faster  than  he  had  already  contracted. 
The  country  was  already  wincing  under  the  severity  of  the  process. 
From  the  30th  November,  1867,  to  the  1st  July,  1869,  the  date  he 
fixed  for  possible  resumption,  a  period  of  nineteen  months,  he  could 
not  have  hoped  to  contract  at  a  greater  rate  than  four  millions  per 
month  ;  a  full  sum  of  seventy-six  millions.  The  sum  of  paper  money 
would  then  be  that  last  stated,  less  seventy-six  millions ;  in  other 
words,  say  six  hundred  million  dollars.  It  will  be  seen  that  the 
Secretary  made  an  allowance  for  the  growth  of  the  country  from 
1865  to  1869,  and  its  consequent  need  of  an  increased  circulating 
medium,  by  the  advance  in  the  sum  of  paper  currency  which  he 
estimated  that  the  country  could  float  at  a  par  of  coin  by  one  hun- 
dred millions — that  is,  from  five  to  six  hundred  millions. 

If  this  view  be  correct,  and  a  similar  advance  of  100  millions  for 
the  four  years  from  1869  to  1873,  (his  estimate  was  of  an  advance 
of  100  millions  for  the  four  years  from  1865  to  1869,)  be  now 
allowed  as  not  unreasonable,  then  we  have  the  sum  of  700  millions 


34 

as  the  precise  measure  of  the  amount  of  paper  currency  which,  in 
his  view,  can  now  be  floated  on  a  par  with  coin — at  least,  if  present 
inferences  may  be  drawn  from  his  past  opinions.  The  precise 
measure  of  our  present  currency  may  as  well  be  stated : 

United  States  greenbacks  and  fractional  currency,  Oct.  1, 1873, .  $402,309,134  03 
National  bank  notes,  Feb.  28, 1873, 336,292,459  00 

Total, $738,601,593  03 

From  what  may  be  gathered  from  the  reports  of  Mr.  McCuLLOce, 
his  plan  of  a  return  to  specie  payment  was  contraction  to  a  cer- 
tain point,  which  has  been  stated,  and  then  resumption  by  the 
Treasury  on  the  basis  of  a  gold  reserve  in  its  vaults.  The  national 
banks  would  have  followed  perforce,  or,  falling  under  the  ban  of  the 
law,  have  been  wound  up  and  passed  out  of  existence. 

The  plan  o/Mr.  GREELEY  for  immediate  resumption  was  based  on 
the  same  theory  of  Treasury  resumption.  In  his  financial  address 
at  Louisville,  September  22,  1872,  during  the  political  canvass 
which  preceded  the  last  election,  he  said  :  "  My  opinion  was,  years 
ago,  and  I  have  seen  no  reason  to  change  it,  that  when  we  had  one 
hundred  and  twenty-five  millions  of  money  in  the  Treasury,  mainly 
gold,  and  when  we  had  a  revenue  exceeding  the  necessary  outlays 
of  the  Treasury  by  more  than  one  hundred  millions  per  annum,  we 
were  then  in  a  condition  to  resume  specie  payments ;  that  if  the 
Government  had  chosen  to  say  '  we  will  resume,  we  will  take  our 
greenbacks  and  will  receive  them  as  gold,'  there  would  have  been 
no  difficulty  in  making  that  resumption.  Under  that  state  of  affairs 
I  have  seen  the  Bank  of  England  resume."  Mr.  GREELEY  not  only 
omitted  to  state  that  the  Government  had  come  into  solemn  engage- 
ment with  every  taker  of  its  bonds  to  collect  its  customs  in  coin  for 
the  secure  payment  of  their  interest,  and  that  a  breach  of  faith, 
even  in  a  partial  abandonment  of  this  pledge,  would  seriously 
injure  the  national  credit,  but  he  further  forgot  that  when  the  Bank 
of  England  resumed,  it  was  to  make  good  in  coin  a  currency  of 
21  million  pounds  sterling — 100  millions  of  dollars — the  amount 
of  its  paper  currency,  outstanding  at  the  day  of  its  greatest  ex- 
pansion, and  not  400  millions,  as  our  Treasury  would  have  been 
forced  to  do,  and  this,  too,  in  a  country  where  gold  is  always 
abundant  and  which  is  in  close  proximity  to  the  great  gold  money 
markets  of  the  world — Paris,  Amsterdam,  Frankfort  and  Vienna 
— while,  on  the  other  hand,  coin  has  for  years  been  gradually 
driven  out  of  the  United  States,  and  the  viciousness  of  our  system 
has  placed  us  out  of  the  reach  of  foreign  aid  and  sympathy. 


35 

The  third  plan  is  that  of  Mr.  Senator  SHERMAN,  who  introduced 
into  the  Senate,  on  the  llth  July,  1868,  a  bill  for  the  funding  of  the 
national  debt  and  for  the  conversion  of  the  notes  of  the  United  States. 
This  provided  for  conversion  at  the  will  of  any  holder  of  United 
States  notes,  (greenbacks,)  to  the  amount  of  $1,000,  or  any  multiple  of 
$1,000,  into  bonds  for  an  equal  amount,  and  that  any  holder  of  the 
bonds  might  demand  payment  of  the  same  by  the  Treasury,  unless 
the  amount  of  notes  outstanding  shall  be  equal  to  400  millions 
— such  process  to  cease  after  the  resumption  of  specie  payments  by 
the  United  States.  To  this  was  added  a  section  giving  legality  to 
contracts  made  specifically  in  coin.  The  advantages  of  this  plan 
were  more  apparent  than  real,  and  they  grew  smaller,  as,  by  the 
gradual  reduction  of  the  funded  debt,  it  passed  into  firmer  and 
more  secure  holding.  The  holders  of  the  debt  during  the  recent 
crisis  were  not,  to  any  great  extent,  willing  to  convert  their  bonds 
into  currency  when  they  had  the  opportunity,  by  the  sale  of  bonds 
to  the  Secretary.  The  demand  for  such  conversion  came  chiefly 
from  the  savings  banks,  who,  having  immediate  engagements  to 
fulfill,  the  possible  extent  of  which  they  could  not  measure,  made 
such  conversion,  but  locked  up  the  currency.  It  afforded  little 
relief  to  the  general  community. 

It  must  be  also  observed  that  the  limit,  400  millions,  set  up  as 
the  barrier,  which  should  not  be  passed,  in  such  conversion  of  bonds 
into  currency,  is  not  far  distant.  Mr.  SHERMAN  will  no  doubt  also 
now  allow  that  the  country  has  grown  up  to  the  amount  of  cur- 
rency, 700  millions,  which  he  considered  to  be  thirty-five  per  cent, 
in  excess  of  our  needs  in  1869.  This  ingenious  plan  of  converti- 
bility back  and  forth  of  bonds  into  currency  and  currency  into 
bonds  for  the  purpose  of  furnishing  flexibility  to  the  currency,  is  the 
corner-stone  of  the  free-banking  law  project. 

In  January,  1869,  Mr.  SHERMAN  put  forward  a  further  plan. 

He  then  proposed,  in  addition  to  the  legalization  of  gold  contracts 
and  the  extension  of  this  system  to  the  national  banks,  a  grant  to 
the  banks  of  the  authority  to  issue  gold  notes  equal  to  sixty-five 
per  cent,  of  the  value  of  United  States  bonds  deposited.  He  ex- 
pressed the  idea  that  "many  of  the  banks,  especially  in  commercial 
cities,  would  gladly  avail  themselves  of  such  a  provision  to  with- 
draw their  circulation  and  substitute  gold  notes,  convertible  on 
demand  into  coin."  He  sums  up  his  argument  by  saying :  "  If  we 
are  sincere  in  wishing  specie  payments,  we  must  not  only  multiply 
the  demands  for  coin ;  we  must  encourage  contracts,  issue 
coin  notes  both  by  the  United  States  and  by  the  banks,  and  thus, 


36 

without  contraction,  dispense  with   the   use   of   the   inferior   and 
depreciated  currency." 

This  is  a  plan  of  gradual  substitution  of  gold  certificates  of  large 
and  small  denominations,  (the  large  by  the  Treasury,  the  small  by 
the  banks,  it  may  be  supposed,)  for  existing  greenbacks  and  national 
bank  notes. 

These  plans  are  based  upon  entirely  different  theories ;  that  of 
Mr.  McCuLLOCH,  for  resumption  by  the  Treasury  under  certain  con- 
ditions, and  that  of  immediate  resumption  by  Mr.  GREELEY, 
assume  that  the  ratio  of  reserve  to  issue — that  is,  of  coin  in  the 
Treasury  to  greenbacks  in  circulation — is  the  true  measure  of  safety ; 
but  on  a  closer  view  it  seems  that  it  is  only  a  secondary  measure. 
The  true  principle  for  the  maintenance  of  an  equality  between  coin 
and  currency  is  to  be  found  in  the  correct  ratio  of  coin  in  the 
country  to  the  circulating  medium  of  the  country — in  other  words, 
in  the  specie  strength  of  the  general  circulation.  The  one  may 
provide  a  proper  basis  for  a  resumption  by  the  Treasury  alone, 
though  it  is  not  probable  it  could  be  maintained,  even  with  a 
much  larger  sum  than  the  Treasury  has  ever  yet  held ;  the  other 
establishes  the  ground  for  a  general  resumption. 

The  objection  to  these  plans  is,  that  by  locking  up  coin  in  the 
Treasury  they  keep  up  the  price  of  gold.  If,  on  the  contrary,  the 
gold  be  let  loose  and  added  to  the  present  circulating  medium,  with- 
out other  action,  that  of  itself  will  produce  an  inflation  under  which 
prices  will  again  rise,  the  medium  be  again  contracted  through 
some  sudden  want  of  confidence,  and  gold  again  disappear.  Never 
were  truer  words  uttered  than  those  of  Mr.  McCuLLocn,  when  he 
said :  "  It  is  a  well-established  fact  that  the  demand  for  money  in- 
creases (by  reason  of  the  advance  of  prices)  with  the  supply,  and 
that  this  demand  is  not  unfrequently  most  pressing  when  the 
volume  of  currency  is  the  largest  and  inflation  lias  reached  the  cul- 
minating point."  This  applies  to  all  purely  paper  and  to  all  mixed 
currencies. 

The  plan  of  Mr.  SHERMAN  recognised  the  truth,  that  there  must 
be  substitution  and  not  contraction,  and  he  proposed,  by  what  seems 
a  most  cumbrous  plan,  the  gradual  passage  of  the  banks  and  Trea- 
sury into  a  new  system.  The  great  objections  to  it  are  that,  during 
the  long  process,  it  would  add  to  our  existing  currencies  still  another 
measure  of  values,  and  the  certainty  that  no  such  round-about  ways 
are  now  necessary  if  we  are  at  specie  point. 

If  gold  is  worth  more  than  par,  there  is  no  possibility  of  resump- 
tion. When  it  reaches  the  par  of  greenbacks  it  will  float  in  the 


.37 

currency,  and  by  so  much  as  it  floats  supply  the  demand  for  money 
and  diminish  the  premium  on  greenbacks. 

The  true  plan  for  resumption  is  this  :  The  taking  in  of  the  green- 
backs as  gold  flows  into  circulation,  substituting  coin  for  paper 
without  contraction  or  change  of  values,  arresting  the  process  when 
money  rises  above  seven  per  cent.,  resuming  it  as  it  becomes  cheap, 
and  thus  gradually  absorbing  gold  into  our  circulating  medium. 
When  we  hold  the  same  amount  of  coin  in  proportion  to  our  paper 
currency  that  France  or  Great  Britain  always  hold  in  proportion  to 
their  paper  currencies,  we  may  not  only  declare  but  maintain  a 
legal  resumption.  Until  then,  in  spite  of  all  plans,  the  experience 
of  nations  tells  us  that  this  result  cannot  be  reached.  No  nation 
has  yet  floated  any  large  amount  of  paper  and  kept  it  on  a  par 
with  gold,  with  even  an  equal  amount  of  coin  in  its  circulating  me- 
dium. 

In  the  plan  proposed,  the  gradual  substitution  of  coin  for  cur- 
rency in  our  circulating  medium,  there  need  be  no  forced  change 
of  values.  The  country  will  itself  resume  and  take  and  use  the 
gold  as  it  appears.  It  is  only  needful  to  guard  against  the  in- 
flation which  even  the  entry  of  gold  into  that  medium  when  it 
floats  at  par  will  cause,  by  an  order  of  Congress  requiring  the 
Secretary  of  the  Treasury  to  withdraw  currency  as  coin  appears. 

That  gold  will  be  at  par  before  the  meeting  of  Congress  there 
is  little  doubt.  Indeed,  it  cannot  be  otherwise.  The  time  for 
the  withdrawal  of  the  fractional  currency  has  already  arrived. 
Large  sums  of  silver  are  already  refused  in  exchange  for  green- 
backs in  this  city. 

If  Gen.  GRANT  makes  up  his  mind  to  recommend  to  Congress 
"  to  fight  it  out  on  this  line  " — the  line  of  gradual  resumption — 
there  is  ground  for  a  reasonable  hope  that  specie  payment  may 
be  fully  restored  in  his  term  of  office. 

He  will  not  surely  allow  his  practical  mind  to  be  swayed  from 
its  purpose  by  the  loud  cries  of  the  inflationists.  The  traders 
who  move  the  crops  may  cry  for  more  currency;  the  farmers 
who  make  the  crops,  whose  crops  are  moved,  demand  more  value 
in  the  currency.  The  manufacturer  may  cry  for  expansion ;  the 
artisan,  the  workman,  demand  a  better  measure  of  value.  The 
cry  for  inflation  may  be  the  cry  of  all  those  who  live  by  the 
labor  of  others ;  the  cry  for  specie  is  the  cry  of  the  people. 
They  are  weary  of  unsettled  prices,  and  know  full  well,  that 
often  as  the  load  of  decline  may  be  shifted,  it  is  upon  their 
shoulders  that  it  must  fall  at  last. 

4 


If  the  President  holds  firmly  to  this  purpose,  and  the  return  to 
specie  payment  be  the  result  of  the  financial  policy  of  his  ad- 
ministration, he  will  earn  and  receive  the  blessing  of  a  grateful 
people,  and  add  a  leaf  to  the  chaplet  of  his  fame  which  will  not 
pale  even  beside  those  which  tell  of  the  greatest  victories  of  his 
triumphal  career. 

KNICKERBOCKER. 

NEW-YORK,  October  14,  1873. 


Letter  No.  IX. 
OUR  GOLD  RESOURCES. 

THE  fall  in  gold  and  the  probability  that  the  market  must  still 
further  decline,  under  the  large  shipments  which  have  but  begun 
from  England  to  this  country,  warrant  the  belief  that  par  will  be 
reached  before  Congress  meets  in  its  ordinary  course.  For  the  first 
time  since  the  disappearance  of  the  precious  metals  in  1861  it  seems 
possible  to  begin  to  restore  coin  to  its  proper  place  in  the  circulating 
medium  of  the  country. 

The  circulating  medium  does  not  now  seem  to  be  excessive.  We 
have  only  to  keep  it  at  its  present  amount,  allow  values  gradually  to 
settle  themselves  to  its  measure  and  take  steps  to  improve  the  medium 
itself.  To  improve  the  medium  it  is  not  necessary  either  to  lessen 
or  to  add  to  it.  It  must  neither  be  contracted  nor  expanded.  It 
must  be  held  firmly  at  the  present  point,  and  a  gradual  substitution 
of  coin  for  currency  be  made.  As  fast  as  gold  appears  in  circula- 
tion at  par,  a  permanent  place  must  be  made  for  it  in  the  circulating 
medium  by  a  retirement  of  an  equal  amount  of  paper.  The  gauge 
of  this  transfer  will  be  the  price  of  money ;  when  it  rises  above 
seven  per  cent,  in  the  financial  centres  the  process  must  be  stopped  ; 
when  it  falls  below  this  amount  it  may  be  always  safely  resumed 
without  any  change  in  values. 

The  chief  element  in  this  process  of  substitution  of  coin  is  the  sum 
of  specie  now  here,  or  which  may  be  hoped  for  in  the  course  of  the 
coming  year.  It  is,  indeed,  a  strange  anomaly  that  this  country  ? 
the  new  Eldorado  of  the  world,  the  great  producer  of  the  metals 
which  the  universal  experience  of  mankind  has  chosen  as  the  stand- 
ard of  value,  should  be  the  only  country  where  these  metals  are  dis- 
regarded and  cried  down  as  "  relics  of  barbarism  unworthy  of  our 
age."  Yet  so  long  as  we  make  a  part  of  the  financial  world,  we 


39 

must,  in  some  form,  accommodate  ourselves  to  the  standard  of  value 
in  general  use. 

The  Treasury  Department  reported  the  total  amount  of  gold  and 
silver  of  domestic  production,  deposited  at  the  United  States  Mint 
and  branches,  for  coinage,  from  the  beginning  of  the  Government 
to  June  30,  1872: 

Gold, $836,205,463  50 

Silver, 23,065,499  24 


Total, $859,270,962  74 

Under  ordinary  circumstances  the  mode  by  which  to  arrive  at  an 
approximate  idea  of  the  amount  of  this  product  now  remaining  in 
the  country,  would  be  to  deduct  from  it  the  total  amount  reported 
by  the  Treasury  as  exported  up  to  same  period.  The  remainder 
would  stand  for  the  sum  of  gold  now  in  the  country.  This  process 
would  entirely  disregard,  on  the  one  hand,  the  large  amounts  of 
coin  taken  out  of  the  country  by  private  individuals,  travelers,  &c., 
of  which  no  exact  account  can  be  had ;  but,  on  the  other  hand,  it 
would  also  disregard  the  equally  large  amount,  though  in  smaller 
sums,  brought  into  the  country  by  immigrants.  A  still  much  larger 
amount  should  also  be  allowed  in  such  estimate  for  that  withdrawn 
from  circulation  and  used  in  plate  and  in  the  general  arts. 

The  general  estimate  of  the  amount  of  coin  in  circulation  in  1860 
was  that  of  $250,000,000. 

The  Treasury  Department  reported  the  coinage  of  the  mint  to  the 

30th  June : 

Gold.  Silver.  Total. 

1861, $80,708,400  64    $2,883,706  94  $83,592,107  58 

1862, 61,676,57655     3,231,08151  ....  64,907,65806 

1863, 22,645,729  90  ....  1,564,297  22  ....  24,210,027  12 

1864, 23,982,748  31  ....  850,086  99  ....  24,832,835  30 

1865, 30,685,699  95     950,218  69  31,635,918  64 

Total, $219,699,155  35     ....  $9,479,391  35     ....  $229,178,546  70 

On  the  other  hand,  the  Treasury  Department  reported  the  amount 
of  exports  and  imports  of  gold  and  silver  to  30th  June  : 

Export*.  Importt. 

1861, $29,791,080  ....  $46,339,611 

1862, 36,886,956  ....  16,415,052 

1863, 64,156,611  ....  9,584,105 

1864, 105,244,350  ....  13,115,612 

1865, 67,643,226  ....  9,810,072 

Total, $303,722,223    ....    $95,264,452 


40 

Showing  an  excess  of  exports  over  imports  of  $208,460,771  from 
1860  to  1865.  If  we  then  take  the  estimated  amount  of  coin  in  the 
country, 

In  1860,  say $250,000,000 

Add  coinage  from  1860  to  1865, 229,178,546 


Total, $479,178,546 

And  deduct  the  excess  of  exports, 208,460,771 


There  remains  as  amount  of  coin  in  1865, $270,717,775 

Under  ordinary  conditions  this  would  be  a  fair  statement  of  the 
then  existing  amount  of  specie  in  the  country.  Unfortunately  for 
any  thing  like  even  comparative  nearness  of  estimate,  there  enters 
into  it  the  disturbing  element  of  war.  How  is  it  possible  to  esti- 
mate the  amounts  of  coin  which  were  hoarded  in  the  South  during 
the  war?  How  much  coin  found  its  way  to  the  South  and  passed 
out  of  the  country  through  its  ports  and  overland  by  Mexico  ? 

Still,  as  the  subject  is  examined,  the  conviction  inevitably  results 
that  the  amount  of  coin  in  private  hands  in  the  country  is  greatly 
under  estimated. 

Those  who  refuse  to  accept  the  deductions  from  positive  premises, 
must  show  the  falseness  of  the  premises  before  they  attack  the  con- 
clusion which  depends  on  them. 

Resuming  then  the  foregoing  calculation,  the  sum  of  $270,000,000 
is  the  starting  point  for  the  sum  of  specie  in  the  country  30th  of 
June,  1865. 

We  will  now  resume  the  Treasury  tables  since  that  date. 

The  coinage  of  the  Mint  waa  as  follows  : 

Gold.  Silver.  Total. 

1866, $37,429,430  46  . .  $1,596,646  58  . .  $39,026,077  04 

1867, 39,838,878  82  . .  1,562,694  18  . .  41,401,573  00 

1868, 24,141,235  06  . .  1,592,986  48  . .  25,734,221  54 

1869, 32,027,966  03  . .  1,574,937  17  . .  33,602,903  20 

1870, 30,103,364  75  . .  2,670,054  16  . .  32,773,418  91 

1871, 34,403,564  42  . .  5,500,085  38  . .  39,903,649  80 

1872, 36,193,18773  ..  13,421,77937  ..  49,614,96710 


Total, $234,137,627  27     . .     $27,919,183  32     . .    $262,056,810  5& 

« 

The  amount  of  exports  and  imports  of  gold  and  silver  for  the 
same  period  was : 


41 

Exports.  Imports. 

1866, $86,044,071  ....  $10,700,092 

1867, 60,868,372  ....  22,070,475 

1868, 93,784,102  14,188,368 

1869, 57,138,380  19,807,876 

1870, 58,155,666  ....  26,419,179 

1871, 98,441,988  21,270,024 

1872, 79,877,534  13,743,689 


Total, $534,310,113        ....        $128,199,703 

Showing  an  excess  of  exports  over  imports  of  $406,110,410. 
If  we  then  take  the  estimated  amount  of  coin  in  the  country : 

In  1865,  say $270,000,000 

Add  coinage,  1865  to  1872, 262,056,810 


Total, $532,056,810 

And  deduct  the  excess  of  exports,  1865  to  1872, 406,110,410 


There  remains  an  amount  of  coin  in  1872, $125,946,400 

Now,  on  the  30th  June,  1872,  the  Treasury  and  banks  held  a  sum 
exceeding  one  hundred  millions.  A  careful  review  of  this  subject 
leads  inevitably  to  the  conclusion,  that  sufficient  account  has  never 
been  taken  in  this  country  of  the  sums  of  coin  in  private  hoard. 

In  the  preceding  no  consideration  has  been  given  to  the  sums 
of  bullion  which,  passing  through  private  assay,  are  not  included 
in  the  tables  of  the  Treasury  Department. 

What  are  the  present  coin  resources  independent  of  this  apparent 
large  private  hoard,  which,  being  a  sum  uncertain,  indefinite,  and 
not  to  be  proven,  must  be  left  out  of  the  calculation  ? 

The  report  of  the  Treasury  for  the  1st  October,  1873,  stated  the 
amount  of  coin  in  the  Treasury  at  $80,246,757  54.  The  national 
banks  held,  at  the  last  September  showing,  $18,844,600,  of  which, 
perhaps,  (not  represented  by  the  Treasury  in  its  gold  certificates,) 
say  $10,000,000.  There  is  estimated  to  be  in  outside  holding,  say 
$40,000,000;  total  sum,  say  $130,000,000.  There  is  on  the  way 
from  Europe,  or  lately  arrived,  $10,000,000 ;  allowing  for  further 
receipts  from  Europe  of  $10,000,000,  we  have  in  all  a  grand  total  of 
coin  of  $150,000,000,  upon  which  it  is  safe  to  calculate  before  the 
1st  January,  1873. 

Is  this  not  a  safe  basis  upon  which  to  commence  the  substitution 
of  coin  for  greenbacks  ? 

For  a  legal  resumption  by  the  Treasury  before  that  period,  or  at 
that  period,  certainly  not ;  but  with  the  certainty  that  we  shall  have 


42 

this  amount  of  coin,  there  seems  to  be  no  reason  why  a  substitution 
of  coin  for  greenbacks  in  the  circulating  medium  may  not  be  under- 
taken so  soon  as  gold  falls  to  par. 

For  the  year  1874  we  may  safely  rely  on  some  addition  to  our 
coin  from  Europe,  surely  enough  with  our  own  productions  to  make 
up  the  sum  of  $50,000,000  more.  Why  may  we  not  take  a  large 
part  of  this  sum  also  into  our  circulating  medium  ? 

What  need  be  feared  ?  It  is  shown  that  in  the  years  from  1866 
to  1872  the  Mint  has  received  and  coined  two  hundred  and  sixty 
millions  of  dollars ;  that  in  that  same  period  we  have  been  able  to 
export  four  hundred  millions  of  the  precious  metals.  What  need 
be  feared  ? 

So  long  as  we  were  running  on  upon  inflated  values,  to  which  no 
check  had  been  given  by  an  arrest  of  confidence  in  an  exorbitant 
system  of  credit,  based  on  a  paper  system,  there  was  no  chance  of 
any  plans  of  even  gradual  resumption  by  a  substitution  of  coin  for 
paper.  But  now  that  it  has  been  found  that  there  is  a  day  of  judg- 
ment and  settlement  for  transactions  in  paper  as  well  as  for  trans- 
actions in  gold,  it  cannot  be  denied  that  if  it  be  now  possible  to 
return  to  a  gold  basis  the  trial  is  worth  making. 

In  the  foregoing  statements,  based  upon  the  latest  figures  of  the 
Treasury  Department,  the  history  of  this  last  year's  transactions 
has  been  disregarded.  It  has  already  been  shown  that  our  ship- 
ments of  coin  have  largely  fallen  off — to  an  extent  since  the  1st 
January  up  to  the  1st  October,  1873,  as  against  those  of  1872,  of 
$17,000,000,  and  against  1873  of  $28,000,000.  Our  imports  had 
diminished  in  the  same  period  $27,000,000.  No  one  who  has 
watched  the  movement  of  trade  during  the  present  month  has 
failed  to  notice  the  enormous  increase  in  our  exports.  They  are 
already  at  this  date  $53,000,000  in  excess  of  those  of  1872,  for  same 
period.  It  is  too  early  to  take  note  of  the  decrease  in  imports. 
The  effect  of  the  panic  had  hardly  been  felt  at  the  date  of  the  last 
official  statement ;  but  it  is  not  unsafe  to  say  that  fully  one-half  of 
the  orders  for  imports  of  foreign  goods  have  to-day  been  canceled. 
The  importer  would  be  wild  indeed  who,  in  the  face  of  our  recent 
stringency  in  money,  shrinkage  in  prices,  and  uncertainty  as  to  the 
future  of  the  market  here,  would  leave  orders  outstanding  that 
could  be  canceled.  While  unfortunately,  therefore,  there  still  exists 
great  difficulty  in  the  movement  of  produce,  and  our  crops  may  yet 
wait  before  reaching  the  hungry  markets  which  await  them,  it  is 
nevertheless  sure  that  every  bushel  of  wheat  on  which  Europe  de- 
pends for  subsistence,  and  every  bale  of  cotton  which  is  necessary 


43 

to  enable  her  working  men  to  earn  the  means  of  subsistence,  will 
sooner  or  later  be  taken  from  us  and  paid  for  in  coin.  Only  let  us 
wisely  seize  the  opportune  moment  to  deny  ourselves  that  which 
we  may  very  well  do  without  for  a  time  at  least,  and  while  sending 
to  Europe  that  which  she  must  have  for  life's  sake,  restore  that  pre- 
ponderance which  the  food-producing  nations  can  always  maintain 
over  the  food-purchasing  nations  in  the  trade  of  the  world. 

Only  to  this  end  let  us  no  longer  delude  ourselves  with  the  idea 
that  paper  is  money,  or  exchangeable  otherwise  than  as  the  repre- 
sentative of  value.  That  representative  of  value,  like  all  others, 
must  be  measured  by  the  inevitable  standard  of  value,  so  long  as 
we  find  it  necessary  or  profitable  to  trade  with  foreign  nations. 

It  cannot  be  believed,  that  when  our  people  look  upon  the  vast 
resources  of  this  country,  its  enormous  product  of  the  precious  met- 
als, that  it  will  consent  to  part  with  them  with  such  indifference. 
How  strange  the  spectacle,  that  the  country  can  witness  an  export 
of  fifty  or  sixty  millions  a  year  of  gold  and  silver  with  indiffer- 
ence, and  yet  hail  with  such  joy  as  it  has  shown  the  return  of  ten 
millions.  The  measure  of  our  prodigality  is  full.  Let  us  now  take 
pride  in  showing  the  world  that  a  country,  which  in  eight  years 
has  redeemed  six  hundred  millions  of  its  national  debt,  while  ex- 
porting four  hundred  millions  of  coin,  can  now,  without  other  effort 
than  its  own  powers  of  production  and  economy,  and  by  a  simple  and 
natural  process,  return  to  specie  payment,  and  enter  once  more  into 
the  great  family  of  financial  nations. 

Then  we  may  indeed  feel  that  we  were  not  wrong  in  the  judg- 
ment so  often  set  forth  during  the  great  rebellion,  that  the  supreme 
effort  to  maintain  the  unity  of  the  country  was  not  only  in  our 
physical  power,  but  wholly  within  our  money  resources. 

KNICKERBOCKER. 

NEW- YORK,  October  17,  1873. 


Letter  No.  X. 
WHAT  SHALL  WE  DO  WITH  IT? 

SPECIE  in  coin  and  bullion  is  rapidly  flowing  in  upon  us,  and 
there  is  no  reason  to  believe  that  this  natural  course  will  be  stopped 
for  a  long  period.  We  may  look  for  many  millions  more  before 
there  be  even  a  lull  in  the  movement.  England  has  not  yet  bought 


44 

any  considerable  part  of  the  grain  and  cotton  which  are  absolutely 
needful  to  her,  and  so  long  as  she  continues  her  purchases  she  must 
pay  us  in  hard  cash.  So  great  is  the  want,  and  so  large  the  compe- 
tition for  its  supply,  that  even  the  steamers  are  called  upon  to  the 
utmost  of  their  freight  capacity.  Those  of  the  English,  French  and 
German  lines  went  out  on  Saturday  heavily  laden,  and  those  for  the 
present  week  have  full  cargoes  engaged.  The  small  demand  for 
bills  adds  value  to  every  moment  that  can  be  saved  in  getting  the 
coin  returns  for  this  export. 

The  Bank  of  England  has  raised  its  rate  of  interest  to  seven  per 
cent.,  but  that  is  no  proof  of  any  unwillingness  on  her  part  to  send 
coin  to  the  United  States,  but  only  of  her  intention  to  keep  up  her 
own  strength  under  the  withdrawal  of  coin  for  shipment.  The 
raising  of  the  rate  of  interest  serves  the  double  purpose  of  check- 
ing trade  and  of  attracting  money  to  the  bank  vaults.  Just  so 
soon  as  the  transfer  of  money  from  the  other  financial  centres  of 
Europe — Paris,  Frankfort,  Vienna,  Amsterdam — becomes  profita- 
ble, coin  will  flow  from  them  to  England,  to  take  advantage  of  the 
advanced  premium. 

Were  this  not  the  case,  the  elasticity  of  the  circulating  medium 
of  England  itself  would  be  fully  equal  to  the  strain  upon  it.  It 
would  be  strange,  indeed,  if  this  wealthy  nation,  which  has  taken 
the  greater  part  of  the  large  sums  of  specie  shipped  by  us  during 
past  years,  cannot  now  spare  us  even  a  small  per  centage  of  that  sum 
without  general  distress. 

The  returns  of  the  Treasury  Department  published  Saturday  last, 
give  the  net  amount  of  specie  exported  during  the  fiscal  year  end- 
ing June  30,  1873,  as  $63,127,637;  bringing  up  the  net  outgo  of 
specie  since  the  close  of  the  war,  i.  e.,  from  July,  1866,  to  July, 
1873,  to  $469,238,047. 

So  far  from  the  Bank  of  England  looking  with  regret  upon  the 
return  of  specie  to  this  country,  there  is  every  reason  to  believe  that 
the  directors  of  this  institution  would  be  the  first  to  hail  with  joy 
the  resumption  of  specie  payment  by  the  United  States.  Much  in- 
terested as  the  foreign  bankers  and  gold  brokers  may  be  in  the  fluc- 
tuation of  values  which  give  them  such  chances  of  rapid  and  large 
profits,  the  great  banks  themselves  know  well  that  their  true  inter- 
est is  in  steady  markets  and  even  money  rates. 

Surely  it  cannot  be  for  their  interest  that  the  United  States  should 
remain  shut  out  from  the  family  of  specie-paying  nations  one  day 
longer  than  can  be  avoided. 

The  Saturday  Review^  in  its  number  of  October  4,  clearly  hints 


45 

at  this  feeling  in  saying  :  "  The  causes  of  the  money  difficulties  are 
clearly  understood  in  England,  and  it  will  be  a  matter  for  regret  if 
the  Government  of  the  United  States  has  resorted  to  any  empirical 
attempt  to  relieve  the  pressure.  But  for  the  existence  of  an  in- 
convertible paper  currency,  the  arrival  of  gold  from  Europe  would 
probably  soon  have  enabled  the  banks  to  meet  their  liabilities." 

The  view  taken  by  one  of  your  neighbors  of  Printing-House 
Square  in  saying  that  the  shipment  of  a  few  more  millions  of  gold 
from  England  to  the  United  States  is  "  certain  to  be  disastrous  to 
both  countries,"  is  not  a  correct  view,  and  the  result  will  so  prove. 

There  is  little  doubt  that  but  for  the  unwise  and  persistent  policy 
of  the  Treasury  Department  in  upholding  the  gold  market,  specie 
would  be  now  floating  in  the  country  on  a  par  with  'greenbacks,  and 
the  much-talked  of  "  redeemability  and  convertibility"  be  to-day  a 
practical  fact. 

A  simple  comparison  of  the  Treasury  balances,  at  the  beginning 
and  at  the  close  of  the  money  panic,  will  show  how  far  the  policy 
of  stopping  sales  and  hoarding  receipts  has  been  carried.  The 
Treasurer  reported : 


20th  September,  

Coin  in 
Treasury. 

$83623,595 

OuManding 
Certificates. 

$36,194,700 

Belonging 
to  United  States. 

$47,428,895 

11th  October,  

82099582 

31,213,400 

50,886,182 

Decrease, $1,524,013          $4,981,300  

Increase $3,457,287 

Showing  that  while  holders  of  certificates  withdrew  coin  to  the 
amount  of  five  millions,  the  Treasury  increased  the  amount  at  its 
own  disposal  by  the  sum  of  three  and  a  half  millions  in  the  same 
period. 

From  these  figures  it  may  be  seen  how  much  the  policy  of  the 
Secretary  has  contributed  to  hold  up  the  price  of  gold.  No  one 
with  any  knowledge  of  the  gold  market,  or  who  has  watched  its 
course,  believes  that  there  was  any  such  amount  as  five  millions  on 
the  market  until  the  arrivals  from  Europe.  Yet,  under  the  stop- 
page of  the  sales  of  the  Treasury  and  a  determined  effort  on  the 
part  of  the  gold  brokers  to  force  up  the  price,  it  rose  from  112  to 
115,  to  fall  as  rapidly  to  108.  The  course  is  now  downward,  in 
spite  of  slight  fluctuations  depending  on  the  bankers'  movement 
from  day  to  day.  Meanwhile  large  amounts  must  soon  come  on 
the  market ;  the  assay  office  and  mints  are  turning  out  the  sums 
left  with  them  for  stamp  and  coinage  ;  there  are  at  least  ten  mil- 
lions more  afloat  on  the  way  from  Europe,  and  new  shipments 


46 

are  daily  announced.  To  add  to  this  the  Treasury  itself  must  put 
out  $13,500,000  on  the  1st  November  in  payment  of  interest,  and 
some  of  the  States  pay  out  considerable  sums,  estimated  in  all 
to  amount  to  $2,000,000.  Here  is  a  sum  of  thirty  to  thirty-five  mil- 
lions which  will  be  afloat  on  the  1st  of  next  month,  not  fifteen  days 
distant. 

Nor  is  this  the  end  of  the  movement.  There  is  much  talk  about 
the  terrible  effect  abroad  of  our  taking  back  a  few  crumbs  of  that 
rich  store  which  we  have  been  sending  to  Europe  of  late  years,  and 
threats  of  a  return  of  Government  bonds  to  turn  the  trade  balance  ; 
but  as  the  threats  do  not  come  from  those  who  hold  Government 
bonds,  they  may  be  disregarded.  There  is  no  greater  error  than  to 
treat  the  money  capitalists  of  Europe  as  a  unit,  either  in  interest  or 
in  action.  Just  as  with  us  there  was  small  desire  to  sell  Govern- 
ment securities  during  the  panic,  just  so  in  Europe  the  holders  of 
our  bonds  are,  in  the  general,  those  who  have  no  interest  in 
ordinary  trade.  The  bonds  were  bought  and  are  held  for  invest- 
ment. The  rise  and  fall  in  price  does  not  affect  the  holder  so  long 
as  he  be  sure  of  his  interest,  and  this  he  will  not  fail  to  be  if  we  do 
not  tamper  with  the  Government  credit,  by  breaking  faith  as  to  the 
collection  of  even  a  part  of  the  Customs  in  other  than  coin. 

The  recent  slight  rise  here  in  the  price  of  gold  of  the  early  days 
of  last  week,  was  based  on  an  idle  rumor  that  one  of  the  large  foreign 
houses  had  sold  one  million  of  Government  bonds.  The  truth  was 
only  half  stated.  The  million  of  bonds  were  sold  here,  but  the  for- 
eign branch  of  the  house  repurchased  the  same  day  abroad,  and  the 
bankers  here  were  in  funds  to  take  a  million  of  dollars  of  produce 
bills  at  the  low  rates  then  ruling. 

There  need  be  no  fear  of  any  return  of  Government  securities 
from  Europe,  that  is  certain.  The  holders  of  rail-road  securities  are 
of  a  different  order ;  but  there  is  little  to  tempt  any  sale  of  this  class 
of  securities  in  the  present  depressed  state  of  the  market. 

There  is,  then,  no  doubt  but  that  the  sum  of  specie  coming  to  us 
is  very  large.  What  shall  we  do  with  it  f  It  is  clear  enough  what 
the  people  intend  to  do  with  it ;  they  intend  to  resume,  and  to  pay 
it  out  just  so  far  as  it  will  go. 

It  only  remains  for  Congress  to  provide  for  it  a  permanent 
resting-place  in  the  circulating  medium,  and  it  will  remain  with  us, 
If,  on  the  contrary,  currency  is  not  withdrawn  as  gold  appears,  the 
gold  itself,  added  to  that  circulating  medium,  will  cause  another  in- 
flation, expand  bank  discounts,  provoke  importation,  turn  the 


47 

balance  of  trade  against  us,  and  again  drive  out  coin  from,  the 
country. 

When  will  our  financiers  see  the  truth  which  France  has  always 
recognised,  that  the  true  flexibility  of  a  circulating  medium  should 
be  in  coin  and  not  in  paper ;  that  it  is  a  profound  error  to  meet 
financial  disaster  with  paper  plasters ;  that  when  general  distrust  is 
produced  by  over-trading  there  is  no  way  to  avoid  liquidation,  and 
that  it  is  more  just  and  fair  that  the  suffering  and  loss  which  is 
caused  by  that  liquidation  should  fall  by  contraction  on  the 
shoulders  of  those  to  which  it  belongs,  than  by  expansion  be  shifted 
to  other  and  innocent  shoulders  ? 

The  truth  is,  very  little  legislation  is  necessary.  Let  us  have  a 
respite  for  the  present  from  any  new  plans  of  finance.  If  Congress 
will  provide  a  place  in  the  circulating  medium  for  the  coin  we  are 
sure  to  have  at  the  time  of  its  session,  it  need  go  no  further.  This 
place  should  be  made  in  the  first  instance  by  the  withdrawal  of 
greenbacks.  The  Secretary  should  be  ordered  to  take  them  in  as 
fast  as  coin  arrives  to  take  their  place,  and  the  condition  of  the 
money  market  permits.  Gold  cannot  again  rise  above  par  if  the 
circulating  medium  be  kept  at  its  present  point — seven  hundred 
millions — the  sum  now  generally  allowed  to  be  not  in  excess  of  the 
needs  of  the  country.  The  dearness  of  money  would  keep  it  in  cir- 
culation, and  the  price  of  money  be  the  gauge  by  which  the  Secre- 
tary could  measure  the  time  and  amount  of  withdrawal. 

The  balance  of  trade  would  not  be  turned  against  us,  because  the 
banks,  forced  to  prepare  themselves  for  the  day  when  the  Treasury 
itself  would  resume,  would  so  stop  discounts  as  to  check  imports. 
It  is  a  source  of  regret  that  this  withdrawal  of  currency  should 
not  be  of  the  national  bank  notes ;  but  a  moment's  reflection  will 
show  how  cumbrous  such  a  withdrawal  would  be,  and  how  impos- 
sible to  distribute  the  gradual  reduction  equally  among  the  banks. 
There  is  no  doubt  that  the  people  have  lost  their  confidence  in  the 
national  bank  issues  and  prefer  the  greenbacks.  Yet  it  would  be 
unjust,  after  the  recent  suffering  of  the  banks,  to  inflict  on  them  the 
further  loss  which  such  a  measure  would  involve. 

It  will  be  a  simple  measure  when  a  large  part  of  the  greenback 
issue  has  been  taken  in,  and  the  remainder  made  convertible  into 
coin  at  the  Sub-Treasuries,  to  call  in  the  whole  bank  circulation, 
and  pay  off  the  United  States  bonds  on  which  it  is  based  by  a  new 
issue  of  the  convertible  greenbacks. 

It  is  needless  here  to  notice  the  effect  that  such  a  withdrawal  of 
bonds  would  have  upon  our  national  credit,  There  would  be  a 


48 

saving  of  fifteen  to  twenty  millions  a  year  in  interest,  and  the  debt 
itself  would  be  not  much  in  excess  of  fifteen  hundred  millions — a  sum 
which  would  be  held  beyond  the  contingencies  of  money  markets, 
and  eagerly  sought  for  permanent  holding  both  at  home  and 
abroad.  Our  circulating  medium,  consisting  of  seven  hundred  mil- 
lions, half  greenbacks  and  half  coin,  would  unite  the  best  qualities  of 
the  famed  systems  of  France  and  England — an  amount  of  coin,  as  in 
France,  as  large  or  larger  than  the  issue  of  paper — an  issue  of  paper, 
as  in  England,  so  limited  that  it  cannot  fall  below  the  par  of  coin  ; 
in  addition,  the  American  principle  of  a  reserve  in  coin  in  the  Trea- 
sury equal  to  twenty  or  twenty-five  per  cent,  of  the  greenback  issue. 

The  product  of  coin  in  the  country  would  yearly  supply  quite  as 
much  additional  circulating  medium  as  the  country  would  require, 
and  render  it  yearly  better  and  stronger.  We  have  contributed 
since  the  beginning  of  the  Government  more  than  nine  hundred  mil- 
lions of  specie  to  the  store  of  the  world.  We  have  drained  ourselves 
of  it  much  further  than  it  was  safe  to  do.  Now  that,  in  the  order 
of  nature,  we  have  for  the  first  time  a  chance  to  control  its  course, 
let  us  not  hesitate  to  grasp  it.  Let  us  henceforth  keep  our  own 
precious  metals,  at  least  our  full  share  of  them.  Now  is  our  hour. 
Neglect  it  and  to-morrow  it  may  be  too  late.  Can  there  be  a  doubt 
as  to  what  our  choice  will  be  as  to  the  specie — as  to  what  we  shall 
do  with  it  ?  The  country  will  soon  ask  that  question,  and  its  an- 
swer will  be,  We  shall  keep  it. 

KNICKERBOCKER. 

NEW-YORK,  October  20,  1873. 


Letter  No,  XI. 
FLEXIBILITY  IN  THE  CURRENCY. 

IMMEDIATELY  upon  the  opening  of  Congress  there  will  be  laid 
before  it  several  schemes  of  finance,  each  proposing  to  remedy 
present  distress  and  to  provide  against  like  disasters  in  the  future. 

Of  these  the  best  known  are  that  of  Mr.  Senator  SHERMAN, 
proposed  in  July,  1868,  and  January,  1869,  for  the  issue  of  con- 
vertible notes  by  the  United  States  Treasury  to  banks  upon  the 
deposit  of  Government  bonds,  and  that  for  a  new  Bank  Law} 
brought  forward  by  Mr.  FREEMAN  CLARKE,  late  Comptroller  of  the 
Currency,  in  January,  1872. 


49 

The  main  features  of  each  of  these  is  to  provide  flexibility  in  the 
currency.  The  need  of  some  sort  of  flexibility  has  been  clearly 
shown  in  the  late  crisis,  the  circulating  medium  being  limited  by 
law  to  a  fixed  sum.  When,  from  distrust  or  other  causes,  this  fixed 
sum  proved  insufficient,  there  was  no  relief— the  viciousness  of  our 
system  of  paper  money  being  an  absolute  bar  to  any  aid  from  other 
nations,  or  to  any  relief  from  the  money  store  of  the  world—other- 
wise the  gold  arriving  would  have  already  provided  relief.  It  must 
not  be  supposed  that  the  gold  now  flowing  in  upon  us  comes  to  us 
because  of  the  distress  in  our  money  market.  It  is  not  to  us  a  part 
of  the  floating  capital  of  the  world,  seeking  employment  where  it 
is  to  be  had  to  best  advantage,  but  a  mere  commodity  sent  here  to 
be  bartered  for  such  other  commodities,  grain  and  cotton,  as  we 
have  in  abundance  and  other  nations  greatly  need.  Had  there 
been  no  crisis,  the  flow  of  gold  would  have  taken  place,  though, 
perhaps,  it  would  not  have  lasted  so  long  as  is  now  probable. 

There  is,  it  is  true,  a  sum  of  forty-four  millions  in  the  Treasury  of 
the  United  States,  the  remainder  of  the  sum  by  which  Mr.  Secretary 
McCuLLOCH  contracted  the  legal  tender  issues  under  the  act  of 
April,  1866,  and  which  has  been  again,  as  during  the  summer  of 
that  memorable  year  1867,  the  bone  of  financial  contention.  The 
importance  of  the  controversy,  except  as  it  regards  the  interpre- 
tation of  the  law,  has  been  greatly  overrated.  The  issue  of  this 
sum  of  forty-four  millions  would  afford  no  such  relief  as  has  been 
claimed  for  it.  It  would  have  been,  after  all,  but  an  addition  of  six 
per  cent,  to  the  circulating  medium  of  the  country,  which  now  ex- 
ceeds seven  hundred  millions.  A  considerable  part  is  needed  by  the 
banks  to  bring  up  their  reserves  to  the  legal  point.  It  must  not  be 
forgotten  that  this  reserved  currency  is  of  the  legal  tender  issue, 
and  therefore  would  have  been  taken  up  and  hoarded  in  the  same 
way  as  the  rest  of  that  circulation  has  been.  The  withdrawal  in 
currency  not  being  of  the  bank  note  issues,  but  of  the  greenback 
issues,  to  which  legislation  has  given  exceptional  value,  this  reserve 
would  add  but  little  flexibility,  even  if  issued,  and  when  once  issued 
would  never  return  to  its  original  place  as  reserve,  but  be  absorbed 
in  the  medium  which  it  would  itself  have  inflated.  Only  a  direct 
contraction  would  restore  it  to  the  Government  for  similar  use  in 
similar  emergency,  and  we  know  what  Congress  thinks  of  con- 
traction. As  Mr.  BOUTWELL  naively  remarked  in  his  address  of 
Tuesday  evening,  "  It  is  much  easier  for  a  Government  to  extend 
the  volume  of  currency  than  it  is  to  reduce  it."  Yet  to  issue  that 
reserve  to-day,  when  the  market  is  recovering  from  the  pressure, 


50 

would  be  to  inflate  values  and  retard  the  near  approach  of  specie  re- 
sumption. The  theory  of  Mr.  Secretary  RICHARDSON  is  the  true  one. 
If  the  forty-four  millions  be  used  at  all,  it  must  be  for  Government 
purposes,  and  to  provide  for  unforeseen  contingencies  in  Govern- 
ment finances.  And  this  should  be  settled,  beyond  a  doubt,  as  early 
as  possible  by  an  order  of  Congress. 

To  return  to  the  plan  proposed  by  Mr.  SHERMAN.  In  his  speech 
in  the  Senate,  Jan.  27,  1869, he  laid  down  as  the  requisites  of  a  good 
currency : 

"  1.  That  it  be  a  paper  currency.  2.  That  it  be  amply  secured, 
either  by  the  credit  of  a  nation  or  by  unquestioned  collaterals. 
3.  That,  except  in  extreme  cases  of  panic,  it  be  convertible  into 
coin.  4.  That  provision  be  made  for  a  suspension  of  the  right  to 
demand  coin  during  such  panics." 

The  objections  to  this  plan  are  obvious.  What  is  a  panic? 
When  does  it  begin  and  when  does  it  end  ?  If  the  crisis  of  17th 
to  20th  September  had  closed  on  the  latter  day,  (Saturday,)  would  it 
or  would  it  not  have  constituted  a  panic  within  Mr.  SHERMAN'S 
meaning  ?  Probably  not.  Yet  had  the  relief  by  the  issue  of  cur- 
rency in  purchase  of  bonds  by  the  Treasury  been  given  on  Friday, 
instead  of  Saturday,  the  stoppage  of  the  Union  Trust  Company 
would  have  been,  perhaps,  avoided,  and  the  panic  have  ceased,  or, 
at  least,  its  violence  have  been  checked.  Liquidation  would, 
however,  have  gone  on ;  when  once  begun,  it  seldom  stops  before  it 
is  thoroughly  ended.  The  public  like,  now  and  then,  to  take  sound- 
ings even  in  the  wildest  expansions,  and  when  they  begin  they  do 
not  stop  sounding  until  they  touch  the  bottom. 

But  the  difficulty  is  not  only  to  determine  what  a  panic  is,  but 
when  it  exists.  Who  is  to  have  this  enormous  power  conferred 
upon  him  ?  Surely,  the  Secretary  of  the  Treasury  is  not  to  be  sole 
judge  of  such  a  grave  matter,  and  if  not  lie,  who  then  ?  The  banks 
cannot  be  allowed  a  part  in  such  judgment,  for  then  the  disease 
might  become  chronic,  and  a  state  of  panic  become  their  normal 
condition.  These  are  fatal  objections.  Mr.  SHERMAN'S  plan  of  an 
interchangeability  of  notes  and  Government  bonds  would  not  pro- 
vide such  flexibility  as  is  desired  ;  he  himself  proposed  a  maximum 
to  such  issue  and  thus  put  a  limit  to  its  flexibility.  Desirable  as 
some  features  of  his  further  plan  of  an  issue  of  small  gold  notes 
may  have  appeared  in  1869,  when  the  approach  to  a  specie  level 
seemed  so  long  and  so  beset  with  danger,  they  cannot  now  be  so  re- 
garded, when,  under  judicious  management  and  by  simple  process, 


51 

general    resumption    may  be    gradually   attained    without    their 
adoption. 

The  second  plan,  that  of  Mr.  FREEMAN  CLARKE,  for  a  new  bank- 
ing law,  allows  to  any  bank  the  issue  of  as  much  circulation  as  it 
may  choose  to  put  out  upon  proper  security ;  provides  for  a  general 
agency  where  such  notes  shall  be  redeemed  in  legal  tenders,  and 
finally  requires  that  the  Government  shall  hold  a  reserve  of  100  mil- 
lions in  coin  for  the  redemption  of  its  own  notes. 

This  plan  has  greater  flexibility  than  that  of  Mr.  SHERMAN,  but 
is  all  the  more  dangerous  on  that  account.      And  it  would  be  found 
in   practice  that  the   notes   would  be   all   travelling   toward  the 
agency  for  redemption  just  when  they  would  be   most   wanted. 
Such  was  the  case  in  1857,  when  the  action  of  the  interior  banks 
forced  the  suspension  of  the  city  banks  after  all  need  for  such  sus- 
pension had  already  passed.     Nor  does  this  scheme  provide  for  any 
increase  in   the   amount  of  coin  in  the  country,  and  there  is  no 
safety*  in  any  plan  which  is  not  based  on  the  ratio  of  coin  in  the 
country  to  the  amount  of  the  circulating  medium.     If  there  be  no  use 
provided  for  coin,  it  will  not  remain  with  us,  but  follow  the  same 
course  it  has  taken  of  late  years.      The  country  will  be  in  a  con- 
tinual state  of  paper  inflation,  and  at  another  time  of  distrust,  the 
issues  of  the  banks  certainly,  and  perhaps  those  of  the  Government, 
will  be  discredited.    The  present  system  is  quite  as  good  as  this ; 
and  if  to-day  the  Treasury  held  one  hundred  millions  of  coin  and  re- 
deemed its   issues,  would  work  quite   as  well — at  least  until  the 
exchanges  again  turned  against  us,  when  it  is  certain  that  with  the 
limited  supply  of  coin  in  use,  it  would  find  itself  compelled  to  close 
its  doors.     The   Treasury  of  the  United  States  has  no  power  of 
expansion  or  contraction.      It  cannot  raise  the  price  of  money  and 
attract  it  to  its  vaults,  as  the  Bank  of  England  does  in  times  of 
pressure.     Yet  it  would  have  to  maintain  at  par  an  issue  of  350 
millions  of  dollars,  (or  400  millions,  if  the  reserve  can  be  legally 
used,)  on  a  coin  basis  of  100  millions.    The  Bank  of  England,  on  the 
24th  September,  before  the  pressure  for  money  had  begun,  held 
£21,632,321   in  coin  and  bullion  to  an  active  note  circulation  of 
£26,678,140,  or,  say,  of  110  millions  dollars  coin  to  135  millions  cir- 
culation ;  and  this  with  the  great  money  marts  of  Europe  at  her 
very  door.     Yet  it  is  proposed  that  our  treasury  with  the  same  re- 
serve shall  float  three  times  the  amount  of  paper  that  the  Bank  of 
England  keeps  out  when  her  issues  are  the  largest. 

The  position  of  France  may  be  referred  to,  but  gives  no  ground 
for  comparison.     There  is   only  one   paper   circulation  in  France 


52 

•—that  of  the  Bank  of  France — and  since  the  war  its  notes  have 
not  been  convertible  into  coin.  Yet  in  spite  of  her  disasters,  the 
whole  issue  of  notes  did  not  exceed,  on  the  2d  of  October,  2,947,323 
francs,  equal  to,  say,  590  millions  dollars,  while  it  held  in  cash  and 
ingots  the  sum  of  717,338,720  francs,  or,  say,  140  millions  dollars. 
Gold  is  still  at  a  premium  great  enough  to  keep  it  from  general  cir- 
culation, and  will  so  continue  until  some  withdrawal  of  paper  issues 
be  made.  Even  the  Bank  of  France,  though  no  longer  paying  coin, 
has,  by  raising  the  rate  of  discount,  the  power  to  sustain  its  posi- 
tion and  attract  money  to  its  treasury. 

In  these  systems  all  inflexibility  is  in  the  coin  part  of  the  cir- 
culating medium.  The  banks  strengthen  themselves  by  attracting 
money.  In  the  FREEMAN  CLARKE  bill  the  unfortunate  Treasury 
would  be  called  upon,  with  a  reserve  of  100  millions  of  coin,  to  sus- 
tain directly  an  issue  of  350  to  400  millions  of  paper,  and  indirectly 
of  just  as  nfuch  more  as  the  banks  would  find  the  country  willing 
to  take  up.  Here  the  flexibility  is  all  on  the  wrong  side. 

There  is  still  another  plan  proposed,  that  of  a  general  free  bank' 
ing  law,  under  which  any  individual  may  lodge  bonds  with  the 
Treasury,  and  receive  currency,  or  return  the  bonds  and  get  back 
the  currency  at  will.  As  the  Government  debt  is  gradually  re- 
duced, it  would  probably  be  found  that  the  holders  of  bonds  would 
not  be  those  who  would  care  to  make  such  exchanges,  and  the 
scheme  would  practically  defeat  itself.  This  impracticability  ren- 
ders any  further  discussion  of  this  scheme  unnecessary. 

If  it  were  otherwise,  there  seems  to  be  no  reason  why  the  Treas- 
ury Department  should  be  turned  into  such  a  national  pawnbroker's 
shop  as  this  would  make  of  it — where  any  one  who  wanted  to  take 
advantage  of  a  fall  in  stocks  could  borrow  money  from  and  pledge 
his  bonds  with  the  United  States  Treasury. 

Experience  has  certainly  already  shown  us  that  United  States 
bonds  are  the  last  things  which  are  parted  with  in  times  of  pressure. 
There  is  then  no  flexibility  to  be  looked  for  here.  Where,  then,  is  true 
flexibility  to  be  found?  Only  in  the  introduction  of  a  large  amount 
of  coin  into  the  circulating  medium,  by  the  substitution  of  coin  for 
currency  when  gold  shall  be  at  par.  This  policy  should  be  pursued 
until  the  amounts  of  gold  and  paper  in  circulation  are  about  equal 
— say  350  millions  coin  and  350  millions  paper.  This  can  be  reached 
most  easily  by  withdrawing  the  greenbacks  first.  Later,  a  con- 
vertible issue  of  greenbacks  may  purchase  the  bonds  on  which  the 
national  notes  are  based,  and  replace  them  on  their  cancellation. 

All  restrictions  on  banking  should  be  removed.     The  usury  laws 


53 

of  the  several  States  should  be  repealed  by  Congress.  If  it  have 
not  the  clear  authority  under  the  Constitution,  it  should  seek  it  by 
an  amendment.  Seven  per  cent,  should  be  fixed  as  the  legal  rate 
where  no  contracts  are  made.  The  banks  can  be  then  confined  to 
their  legitimate  business  of  deposit  and  discount,  and,  relieved  from 
Government  interference,  transact  their  business  each  in  its  own 
way.  The  strong  banks  need  no  longer  be  forced  to  cast  in  their 
lot  with  the  weak  in  time  of  trouble,  and  this  premium  upon  im- 
prudence be  set  aside.  This  would  be  true  free  banking. 

The  currency  will  thus  be  independent  of  the  banks,  and  no  com- 
bination of  circumstances,  accidental  or  designed,  can  keep  it  from 
the  people  to  whom  it  belongs — while  the  product  of  our  own  soil 
will  add  as  much  coin  each  year  to  the  circulating  medium  as  the 
increasing  business  of  the  country  rnay  require.  This,  and  the  ex- 
emption of  money  from  the  usury  restriction,  which  is,  indeed,  a 
"  relic  of  barbarism,"  will  give  to  the  circulating  medium  the  flex- 
ibility which  it  needs. 

KNICKERBOCKER. 

NEW-YORK,  October  25,  1873. 


Letter  No.  XII. 
NOW  OR   NEVER. 

THE  DUTY  OF  THE  GOVEKNMENT  AS  KEGAKDS  KESUMPTION. 

As  the  hour  approaches  when,  by  the  law  of  supply  and  demand^ 
the  premium  upon  gold  must  inevitably  fall  and  finally  wholly  dis- 
appear, the  power  of  the  country  to  begin  a  gradual  resumption  by 
the  absorption  of  specie"  into  the  circulating  medium,  is  the  main 
and  paramount  question.  That  gold  will  fall  to  par  before  the 
meeting  of  Congress,  hardly  admits  of  a  doubt.  During  the  month 
of  October,  the  mints  received  for  coinage  the  sum  of  ten  millions  of 
dollars.  There  are  now  about  ten  millions  more  on  the  way  from 
Europe.  The  Treasury  Department  must  pay  out  on  the  1st  Novem- 
ber the  sum  of  nearly  fifteen  millions  in  coin  for  interest,  and  on  the 
16th,  fifteen  millions  for  the  loan  of  1862  already  called  in ;  in  all,  a 
sum  of  fifty  millions  will  be  by  the  middle  of  next  month  upon  the 
market.  The  same  causes  which  have  drawn  to  this  side  of  the 
Atlantic  the  sum  of  twenty  millions  still  continue,  and  show  no 

5 


54 

sign  of  early  stoppage.  The  supply,  therefore,  bids  fair  to  be 
largely  increased,  while,  on  the  other  hand,  there  is  no  reason  to 
look  for  any  demand  which  can  take  up  such  a  sum  as  fifty  millions 
in  this  space  of  time.  The  bankers  have  their  hands  full  in  the 
movement  of  produce  and  cotton,  and  money  will  surely  remain 
stringent  enough  to  check  any  considerable  speculation  in  gold,  if 
such  a  spirit  were  likely  under  the  prospect  of  an  increasing  supply. 

The  circulating  medium  does  not  seem  excessive.  All  the  cur- 
rency, both  of  greenback  and  national  bank  issues,  is  fully  em- 
ployed in  the  crop  movement.  Money  will  be  in  full  demand. 
Now,  then,  is  the  moment  to  prepare  to  retire  a  part  of  the  paper 
issues,  as  gold  appears  in  circulation,  and  to  make  a  permanent 
place  for  it  in  our  daily  uses.  Not  only  does  the  present  seem  to  be 
the  favorable  moment  for  the  beginning  of  this  substitution,  but 
there  are  grave  reasons  to  believe  that  if  this  chance  be  neglected 
it  may  not  return  to  us  for  a  long  period  of  years. 

A  view  of  the  amount  of  gold  coin  outstanding  in  the  circulating 
mediums  of  Europe  and  America,  is  here  of  interest. 

In  the  supplemental  report  on  international  coinage,  made  to  the 
Department  of  State  on  the  8th  April,  1870,  by  Mr.  SAMUEL  B. 
RUGGLES,  whose  authority  on  this  and  kindred  subjects  is  beyond 
question,  the  following  table  is  given  of  the  amounts  of  coin  in 

the  currencies  of  Europe  and  America  at  that  date : 

» 

GOLD  COIN  OUTSTANDING. 

I.  In  France,  Belgium,  Switzerland,  and  Pontifical  States,  . , $1,250,000,000 

II.  In  Austria,  Spain,  Sweden,  Greece  and  Roumania, 200,000,000 

III.  In  Germany,  (North  and  South,)  Netherlands,  Denmark,  Nor- 
way, Portugal,  Russia  and  Turkey, 300,000,000 

IV.  In  the  United  Kingdom  of  Great  Britain,. 450,000,000 

V.  In  the  United  States  of  America, 200,000,000 

VI.  In  Canada,  Mexico,  Central  and  South  America, 150,000,000 


Total, $2,550,000,000 

There  have  been  some  notable  changes  in  this  distribution  since 
the  date  of  this  report.  From  one  hundred  to  two  hundred  millions 
have  passed  from  France  to  Germany  in  payment  of  the  tribute  of 
war,  and  the  United  States  have  lost  at  least  fifty  millions  of  the 
amount  held  by  it  in  1870,  as  a  reference  to  the  tables  of  production 
and  export  of  specie  will  show. 

In  the  seventeen  years  ending  the  30th  June,  1870,  the  United 
States  had  exported  over  $650,000,000  of  gold  coin  and  bullion 


55 

beyond  the  amount  imported,  and  thus  provided  for  one-quarter  of 
the  vast  sum  of  European  and  American  coinage. 

The  amount  of  coin  in  circulation  in  the  United  States  has  been 
variously  estimated  at  different  periods.  Mr.  JAMES  GUTHRIE,  Sec- 
retary of  the  Treasury,  in  his  report  of  1854,  gave  the  following  esti- 
mates : 

1853,  gold  and  silver,. . $204,000,000 

1853,  gold  and  silver, 236,000,000 

1854,  gold  and  silver, 241,000,000 

In  the  year  1855  there  began  a  great  outflow,  of  the  precious 
metals  from  the  United  States.  Silver  had  so  risen  in  value  from 
the  Asiatic  demand,  that  the  French  Government  had  undertaken 
to  replace  the  coinage  of  France,  which  had  been  chiefly  of  sil- 
ver, with  gold.  The  constant  and  increasing  supplies  from  Cali- 
fornia rendered  this  a  favorable  moment,  and  under  the  process, 
the  balance  of  trade  being  against  this  country,  a  heavy  exportation 
of  coin  to  Europe  commenced,  which  continued  without  stop  until 
the  Fall  of  1860. 

The  following  tables  show  this  movement : 

Exports  and  Imports  of  Gold  and  Silver,  as  by  the  reports  of  tlie  Treasury  Depart- 
ment, to  June  30. 

Exports.  Imports. 

1855, $59,239,348  $3,659,813 

1856, 45,745,485  ....       4,207,632 

1857, 69,136,922  ....  12,461,799 

1858, 52,703,147  ....  19,274,496 

1859, 63,887,321  ....      7,434,789 

1860, 66,546,239  8,550,135 


Total, $357,258,462     ....  $55,588,663 

— showing  an  excess  of  exports  over  imports  of  $301,669,799. 

On  the  other  hand,  the  amount  of  production  is  shown  to  have 
been: 

Statement  of  Gold  and  Silver  of  domestic  production  deposited  at  the  Mint  to 

June  30. 
Gold.  Silver.  Total. 

1855, ....  $6.3,574,032  54  ....  $371,336  85  ....  $63,945,369  39 

1856, ....  59,608,609  50  ....  294,472  55  ....  59,903,082  05 

1857,....  23,270,03074  127,25612  ....  23,397,28686 

1858, ....  40,977,168  55  ....  316,472  36  ....  41,293,640  91 

1859, ....  27,213,557  15  ....  273,167  47  ....  27,486,724  62 

1860, ....  18,971,041  75  ....  293,797  05  ....  19,264,838  80 


Total,..     $233,614,44023  $1,676,50240  $235,290,94263 


56 

Comparing  these  amounts,  we  then  find  : 

Excess  of  exports, $301,669,799 

Domestic  product, 235,290,942 


Loss  of  coin  1855—1860, $66,378,857 

The  export  movement  continued  during  the  Summer  of  1860, 
until  the  total  amount  of  loss  nearly  reached  one  hundred  millions 
of  dollars.  This  heavy  drain  ceased  in  October,  and  soon  after  the 
tide  turned,  and  an  inflow  began  to  the  United  States  which,  with 
the  amount  of  domestic  product,  increased  the  amount  in  the 
country  by  about  ninety  millions  in  the  year  1860  to  1861.  This 
favorable  movement  in  its  turn  ceased  toward  the  close  of  the 
year. 

There  were,  again,  many  wide  differences  of  opinion  as  to  the 
amount  of  specie  held  by  the  country  in  the  year  1860.  In  his  re- 
port of  1861,  Mr.  JAMES  POLLOCK,  the  Director  of  the  Mint  at 
Philadelphia,  used,,  these  words  :  "  From  the  most  reliable  data 
attainable,  I  estimate  the  amount  of  specie  in  the  United  States  at 
this  date,  October,  1861,  at  from  275  to  300  millions  of  dollars." 
If  we  deduct  from  this  amount  the  increase  of  the  preceding  year, 
which  he  himself  says  "  has  added  about  ninety  millions  to  our 
stock  of  coin,"  we  arrive  at  his  estimate  for  1860  of  two  hundred 
and  ten  millions  as  the  amount  of  specie  in  the  country. 

Mr.  Secretary  McCuLLOCH  did  not  rate  the  amount  so  high  in  his 
report  of  1867.  He  said  :  "The  actual  legitimate  business  of  the 
country  is  not  larger  than  it  was  in  1860,  when  three  hundred  mil- 
lions of  coin  and  bank  notes  was  an  ample  circulating  medium." 
As  the  bank  notes  in  issue  that  year  reached  the  sum  of  two 
hundred  millions,  there  is  room  in  his  estimate  for  only  one  hun- 
dred millions  as  the  stock  of  specie  in  the  country. 

Senator  MORTON,  of  Indiana,  in  a  speech  on  the  finances  in 
December,  1868,  in  the  Senate,  estimated  the  circulating  medium  in 
1860  "at  four  hundred  and  fifty  millions,  of  which  the  entire  bank 
circulation  was  two  hundred  and  two  millions;  in  vaults  of  banks, 
eighty-eight  millions  of  coin,  and  in  the  country,  outside  of  banks, 
one  hundred  and  fifty  millions."  His  estimate  of  the  specie  was 
then  for  the  year  1860,  two  hundred  and  forty  millions. 

Here,  then,  we  have  three  estimates  for  this  period  :  1st.  That  of 
Mr.  Secretary  McCuLLOCH,  of  one  hundred  millions ;  2d.  That  of 
Mr.  POLLOCK,  Mint  Director,  of  two  hundred  and  ten  millions ; 
3d.  Of  Mr.  Senator  MORTON,  of  two  hundred  and  forty  millions. 


57 

When  the  amounts  of  exports,  of  imports,  and  of  production  of 
gold  and  silver  come  to  be  looked  into,  it  will  be  found  that  the 
enormous  exports  of  specie,  from  1861  to  1873,  can  in  no  other  way 
be  accounted  for,  except  by  adopting  a  starting  sum  even  larger 
than  the  estimate  of  Mr.  Senator  MOKTON — and  it  will  be  admitted 
that  two  hundred  and  fifty  millions  is  an  inside  figure.  In  this  cal- 
culation the  mode  of  estimate  will  be  that  taken  by  Mr.  POLLOCK, 
viz. :  the  amount  of  deposits  at  the  mint  of  coin  and  bullion  of 
domestic  production,  adding  thereto  the  foreign  imports  and  de- 
ducting the  exports. 

The  Treasury  Department  reported  the  amount  of  deposits  of 
coin  and  bullion  at  the  various  mints,  less  the  re-deposits,  to  the 
30th  of  Junea  in  the  following  sums : 

Gold.  Silver.  Total. 

1861 $69,084,52374     ....    $3,062,04747     ....    $72,146,57121 

1862, 42,945,659  23     ....       2,477,571  78     ....      45,423,231  01 

1863, 22,153,24455     ....       1,548,59276     23,701,83731 

1864, 23,078,922  94     ....         933,818  55     ....      24,012,741  49 

1865, 26,979,793  76     ....       1,003,055  33     ....      27,982,849  09 

1 866, 30,188,202  53     ....       1,723,516  71     31,911,719  24 

1867, 32,968,338  20     ....       1,568,710  19     ....      34,537,048  39 

1868, 23,117,766  44     ....      1,473,559  40     ....      24,591,325  84 

1869, 31,178,779  34     ....      1,761,478  66     ....      32,940,258  00 

1870, 27,931,390  99     ....      2,477,397  11     ....      30,408,788  10 

1871, 34,339,784  23     ....      4,797,619  90     ....       39,137,404  13 

1872, 37,811,623  60     8,605,830  24    46,417,453  84 

Total, $401,778,029  55     $31,433,198  10     $433,211,227  65 

On  the  other  hand,  the  Treasury  Department  reported  the  amount 

of  exports  and  imports  of  gold  and  silver  for  same  period  to  30th 
June : 

Exports.  Imports. 

1861, $29,791,080  ....  $46,339,611 

.  1862, 36,886,956  16,415,052 

1863, 64,156,611  ,...  9,584,105 

1864, 105,244,350  ....  13,115,612 

1865, 67,646,226  ....  9,810,072 

1866, 86,044,071  ....  10,700,092 

1867, 60,868,372  ....  22,070,475 

1868, 93,784,102  ....  14,188,368 

1869, 57,138,380  ....  19,807,876 

1870, 58,155,666  ....  26,419,179 

1871, 98,441,988  ....  21,270,024 

1872, 79,877,534  ....  13,743,689 

Total, $838,035,336   ....  $223,464,155 


58 
Returning  now  to  the  estimate  named,  of  the  amount  of — 

Coin  in  1860, $250,000,000 

Adding  deposits  in  mint,  1860  to  1872 433,211,227 

And  imports  of  foreign  coin,  1860  to  1872, 223,464,155 

Total, ;  $906,675,383 

And  deducting  exports  of  coin  and  bullion,  1860  to  1872,. .     838,035,336 


There  remained  as  coin,  June  30, 1872, $68,640,046 

Now,  as  it  is  known  that  the  amount  in  the  Treasury  and  "banks 
at  that  date  exceed  one  hundred  millions,  it  is  clear  either  that  the 
starting  point  of  250  millions  was  too  low  an  estimate  of  the  coin 
in  the  country  in  1860,  or  else  that  the  amount  of  bullion  assayed 
by  private,  individuals — which  being  taken  note  of  by  the  Custom 
House,  appears  in  the  export  column,  while  as  it  did  not  pass 
through  the  mint,  it  does  not  appear  in  the  column  of  domestic  pro- 
duction— was  sufficient  to  account  for  this  large  difference.  The 
writer  published  a  calculation  in  his  communication  of  the  17th  of 
October,  based  upon  the  tables  of  the  coinage  of  the  country.  To  this 
it  has  been  objected  that  it  did  not  make  proper  allowance  for  the 
amount  of  imported  specie,  which,  passing  through  the  mint  for 
coinage,  thus  appeared  twice  in  the  estimate.  Starting  at  the  point 
of  250  millions  in  1860,  the  sum  of  126  millions  was  reached  as  that 
remaining  in  the  country  June  30,  1872.  The  results  of  both  of 
these  calculations  are  below  any  reasonable  estimate. 

If  we  take  as  the  probable  stock  June  30, 1872,. $150,000,000 

Add  estimate  of  product  for  1872-73, 35,000,000 

And  imports  to  June  30, 1873,.. 21,480,937 


Total, $206,480,937 

And  deduct  exports  to  June  30, 1873, 84,608,574 


There  remained  in  stock  June  30, 1873, $121,872,363 

A  sum  we  again  find  too  small,  for  on  that  day  the  Treasury 
held  eighty-eight  millions,  and  the  banks  of  New- York  alone,  by 
their  statement  of  June  28,  1873,  twenty-four  millions,  in  all,  a  sum 
of  one  hundred  and  twelve  millions,  without  any  account  of  the 
amount  on  the  street  or  in  private  hands  or  held  by  other  banks. 

Another  estimate  then  becomes  necessary.  The  following  may 
be  safely  taken  as  the  minimum  of  the  stock  to-day : 


59 

In  Treasury,  October  1, $80,246,757 

In  New- York  banks,  September  9,  as  by  statement, 14,585,810 

In  outside  holding, 40,000,000 


Total, $134,832,567 

Received  in  October, 10,000,000 


Total, $144,832,567 

This  is  coinage  enough  to  begin  the  process  of  substitution  with, 
if  by  the  fall  of  gold  to  par  it  be  clearly  shown  that  the  circulating 
medium  is  not  in  excess.  A  few  weeks  will  settle  tin's  point.  If 
we  are  not  now  to  make  the  effort,  what  probability  is  there  that 
we  shall  ever  attempt  to  resume  ? 

A  reference  to  the  foregoing  tables  shows,  that  while  from  1861 
to  1872  the  excess  of  exports  over  imports  of  the  precious  metals 
reached  the  sum  of  $614,571,181,  the  production  in  same  period  only 
amounted  to  8433,211,227.  So  that  we  lost  not  only  all  of  the  pro- 
duct of  our  mines,  but  $181,359,954  from  our  stock.  If  we  add  to 
this  the  difference  between  excess  of  exports  of  sixty-three  millions 
for  the  year  ending  June  30,  1873,  over  the  production  of  same 
period,  estimated  at  thirty-five  millions — say  a  ^oss  of  thirty  mil- 
lions— the  sum  total  of  our  loss  is  carried  to  the  enormous  figure  of 
over  two  hundred  and  ten  millions.  Nor  need  we  console  ourselves 
with  the  thought  that  we  could  not  help  ourselves — that  the  war  was 
the  cause  of  this  great  loss — for,  on  closer  examination,  we  shall  find 
that  from  the  3 Oth  July,  1860,  to  the  30th  July,  1865,  this  loss  was 
only  $15,193,541,  while  from  1865  to  1872  it  amounted  to 
$166,166,413  ;  and  if  our  product  did  not  last  year  exceed  that  of 
1871-72,  the  loss  in  the  single  year  1872-73  will  exceed  that  of  the 
whole  war  period.  Can  we  quietly  sit  still  and  see  this  draining  of 
our  li  fe-blood  at  such  terrible  rate  ?  It  is  not  possible.  If  we  do,  and 
our  production  of  the  precious  metals  remain  the  same  as  at  present, 
and  we  continue  to  lose  coin  at  the  rate  of  the  last  decade,  we  shall 
arrive  at  the  centennial  of  our  independence  with  the  disgraceful  re- 
cord, that  since  we  became  a  nation  we  shall  have  produced  and  coined 
to  the  value  of  ONE  THOUSAND  MILLIONS  DOLLARS  of  gold  and  silver, 
while  the  unfortunate  Secretary  of  the  Treasury  may  hardly  know 
whither  to  turn  for  a  sufficient  sum  to  pay  the  interest  on  the  Govern- 
ment debt.  When  that  day  comes,  the  difference  will  be  found  out 
between  coin  and  paper,  and  the  country  will  learn  to  its  cost  that  no 
law  will  avail  to  check  the  rate  the  European  money  holder  will 
exact  for  that  which  we  now  let  slip  from  us,  with  a  prodigality  for 
which  no  equal  can  be  found  in  the  history  of  the  world.  A  genera- 


60 

tion  is  rapidly  coming  forward  that  has  never  seen  or  handled  the 
national  coin  which  we  yet  have  been  stamping  with  a  dissolving 
image  by  the  hundred  millions.  If  we  hesitate  now  or  falter,  our 
children  may  go  to  their  graves  as  ignorant  as  they  have  been  from 
their  cradle,  It  is  indeed  noio  or  never  that  this  wild  folly  must  be 
stopped.  But  we  will  not  hesitate.  So  soon  as  the  people  take  note 
of  these  stern  facts,  there  will  be  a  movement  which  will  rock  the 
country  like  an  earthquake ;  an  upheaval  of  the  popular  conscience 
which  will  unhinge  party  machinery,  tear  asunder  political  ties,  ancl 
threaten  the  very  life  of  the  great  organization  which  now  controls 
the  destinies  of  the  Republic. 

The  country  looks  trustfully  to  the  President  in  this  crisis.  With 
his  strong  common  sense,  he  will  sooner  or  later  find  the  sure  road 
and  lead  the  country  in  safety,  through  the  perils  which  threaten  it, 
to  the  repose  for  which  it  yearns. 

He  has  already  entered  on  the  true  path  in  the  order  to  withdraw 
the  fractional  currency  and  replace  it  with  silver.  In  this  trial 
measure  he  will  find  that  silver  will  float  in  the  currency  in  the 
precise  rate  in  which  paper  is  withdrawn.  As  there  is  an  abundance 
of  fractional  currency  the  two  cannot  float  together — one  must  be 
withdrawn  in  parf  to  make  room  for  the  other.  From  the  result  of 
this  trial  the  true  manner  of  restoring  gold  to  the  currency  may  be 
established.  There  can  be  no  doubt  as  to  what  the  result  will  be. 
By  substitution,  only,  without  increasing  the  circulating  medium, 
can  the  passage  from  a  paper  to  a  gold  basis  be  effected. 

Let  the  President  take  the  lead  in  this,  the  greatest  measure  of  his 
administration.  Let  him  remember  the  pilgrim's  parable.  Toward 
the  close  of  Christian's  progress  it  is  related  "  That  it  was  Little 
Faith  that  fell  into  the  hands  of  the  rogue  Mistrust,  and  lost  the 
most  of  his  spending  money,  though  he  had  a  little  odd  money  left, 
but  scarce  enough  to  bring  him  to  his  journey's  end,  so  that  he  went 
with  a  hungry  belly  the  most  part  of  the  rest  of  the  way."  It  was 
Hopeful  who,  taking  Christian  by  the  hand,  led  him  through  the 
dangerous  slumbers  of  the  Enchanted  Ground  to  the  beautiful  land 
of  Beulah. 

So  may  the  President,  with  good  courage  and  self-reliant  strength, 
lead  the  country  through  the  dangers  which  beset  it,  to  boundless 
and  sure  prosperity. 

KNICKERBOCKER. 

NEW-YORK,  October  29th,  1873, 


Stockton,  Calif. 

T.  M.  Reg.  U.S.  Pat.  Off. 


YC  24204 


ivJ207701 


SIS 


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